The dynamics of accumulation and distribution of capital which has accounted for the long-term distribution of inequality that lies in the heart of the political economy. In Capital of the twentieth century Picketty gives an analysis of the unique collection of adequate data for the clear introduction of the thesis. Inequality is traced back to the 18th century seeking to uncover the economic and social inequality patterns.
Income inequality refers to the extent to which income is distributed in an uneven manner amongst populations. “In the United States income inequality refers to the gap between the rich and the poor that has been growing and increasing at a disproportionate rate since 1970 and for the past 30 years” (Picketty 22). Income includes all revenues generated from wages, salaries and interests accrued from saving accounts as well as dividends from shares and profits generated from the trade and sale of such shares. This means almost half of the American population had income totaling this amount while the other half had less than that. For instance, the majority of the population had less income.
According to Thomas Picketty analysis of the American income distribution patterns between 1970 to now, there is a general trend in the decrease of the gap between the rich and the poor. The incomes at the bottoms were rising faster than incomes at the top. “However, since 1970 this trend has reversed. In 2008, the top richest household’s shares had doubled in 2007; the rich had a relatively higher season in the wealth and income sector” (Picketty 36).
The great recession of 2008 saw American populations resume the twenty-first with a crashed stock market. However the top earning echelon of society had higher incomes than the bottom layer. Income disparities and inequalities are attributed to the super managerial and financial budgeting by top management. Super managers and those who manage finances for their institutions have had a great impact on the financial and income generation of these firms.
The ethical and economic requirement of the reduction of inequality is the aspect of globalization and public policy. The rich should pay higher as compared to the poor low income earners. There is a high correlation between the top income earners and the higher pretax shares in American. The evolution of the tax predictor is a good measure and indication of reducing the wage inequality. “This has different policy implications meant at the reduction of wage inequalities” (Picketty 60).
Picketty gives an analysis of how the free market has created a loophole in the current concentration of wealth as the rate of capital returns on property and investments has been historically higher than the current economic growth. This is highly contributed by the fact that majority of Americans particularly the poor Americans do not own housing but live in situations where houses are owned by landlords.
Majority of the inequalities in the capital and wealth section is caused by the art of wealth inheritance. Inheritance on wealth creates a system of inequality in society regarding the fact it does not cater for instances where the initial founder of the estate was a self made man or woman. “Wealth concentration and its later inheritance factors escalated the recent increase of inequality in capital and wealth investments caused by demographic and economic factors” (Picketty 136).
Inheritance of wealth and its subsequent concentration of wealth by the younger generation results to the general increase in the wealth redistribution patterns amongst the struggling poor class “who have no inheritance” (Picketty 346). Wealth concentrated as a result of inheritance is a great contributor of social inequality. It hampers the opportunity to create wealth on an equal platform.
Thomas Picketty’s gives an analysis of the twenty first century inequality amongst the developed world populations. Pickett gives an analysis of the current situation by tackling on wealth redistribution and massive taxation to the rich in order to leverage income for the poor. In his book Picketty asks basic fundamental questions. The reduction of the inequality that took place in most developed countries began in the period of colonization particularly in Europe. The accumulation of capital by these countries acted as a cautionary measure against tough times. However, during the post war times the consequence of wealth accumulation led to the historical suicide of Europe’s wealth inequality and it is a founding Euthanasia for American capitalists.
The Same measure applies to the American society. The effect of wealth and capital inequality was very evident in the 19th century. Landlords in America have an advantage of accruing capital since they not only own the property, but also found the means to accrue that capital. “This dates back to the period of slavery in America where southern slave owners produced more agriculturally due to their accrued capital in ownership of land and the subsequent means of production that is labor” (Picketty 231).
Picketty tries to account for historical returns and its effects accrued by capital owners and its contribution to inequality for growing income and capital distribution. The inequality of wealth and capital in the twenty first century sows the seeds of unequal redistribution and generates a historical trend of economic injustice. The cure for such inequalities is the implementation of a universal global tax system that seeks to establish as well cut and reduce instantly in wealth inequality. The accrued capital which usually is passed through inheritance grows many times more than the general economy thus sowing seeds of growing income and wealth inequalities.
The implementation of steep tax in both the income tax and wealth tax would reduce the disparities globally. The general overriding evidence in his central argument is the ailing nature of America’s capitalism. He argues that capitalism and the general markets should be the slaves of democracy and not the other way round. In his deep analysis, Picketty offers a solution through wealth taxation “to cut on crude capitalism prompted by the accruing effects of wealth” (Picketty 109). This is the theoretical compatible with inequality suppression. He argues that the global wealth distribution needs reshuffle in order to bring it into balance.
The capitalism of wealth in America is not entrenched within these boundaries that do not respect for acquisition and disposal of capital within a regime protection of these social liberties. The state through universal legislation can redistribute wealth equally at will. “This can also be done by embracing policies and measures meant to eradicate high tax policy systems endorsed in capital in the 21st century” (Picketty 100).
He argues that the unchecked nature of modern capitalism is geared towards greater and even greater wealth inequality. There should be an effective system where deductions from household incomes should not be uniformly distributed. For instance, there should be a running and effective system of employer provided and fully funded insurance policy. “This should also be in line with the current workers compensation schemes” (Picketty 260).
Mere progressive taxation and transfers would not entirely contribute or account to the address of income inequality. This is meant to boost income concentration and reduce the gaps between the rich and the poor in capital gains. “The global wealth tax would create a system of statistical transparency” (Picketty 334).
Global taxation system would decentralize capital to the common man. Income capital would be taxed evenly along a statistical path that seeks to establish fairness and competence. According to Picketty, the current tax system that he proposes to be included in the capital and wealth gains seeks to reduce the pattern that has enhanced an inequality in the wealth patterns rather than increased consumer prices.
There is also an emerged trend in the 21st century cultural factors that have projected a patrimonial breadwinner have increased income and wealth disparities amongst individuals in America. This system discourages investment and combined pull of resources and wealth. In a system where assets prices have increased faster than consumer prices this is an indication that capital and wealth income distribution is evident in American society.
Many male workers have derived higher incomes from a labor system in America where males are traditionally perceived to be breadwinners. Thus, society should not just ignore Pickett’s highlights on inequality as a theoretical framework of the twenty first century Enlightment but should implement its policies to the later.
There are several implications and lessons derived from Picketty are economic analysis. For instance, his remarks on capitalism in the twenty-first century has been criticized as the 21st century of the post Marxist revolutionary that seeks to undermine democracy and destroy chances of equitable opportunities in the economy and sustainable growth. There are many lessons learnt in this. “This is the twenty-first century philosophical idealism of the power of positive thinking, where historical inequality in income and wealth disparities is bound to repeat itself in the twenty first century” (Picketty 263).
It is a theoretical revolution that seeks to reestablish the equal distribution of income and capital gains. Picketty gives a solution to the bulging and ever widening income inequality by the poor through capital investment and wealth creation. It is an econometric system where the poor can afford to bank on assets that have higher returns as compared to consumer products. “Earnings and wealth inequality can be addressed through universal and global tax system that is aimed at revenue generation from those who have and redistributing it to those who have not “(Picketty 353).
The ruling elite who comprise the private sector have dwarfed national income and concentrated in the hands of the rich. The future effects of the rising inequality are relatively unstable. Inequality as Marx historically argued that social stratification in society is the rotten fabric of unethical and unequivocal economic production.
In conclusion, Picketty argues that the problem of inequality is not caused by the benefits and income paid to the poor but the increasingly unequal wealth commanded by the rich. The general public debt that largely benefits the rich in unequal economic pattern is paid uniformly across all individuals. Amongst the perpetrator of this system is a pattern of lack of incentives for the poor enterprising poor and the incentive wealth concentration by the rich.
Picketty T. Capital and the Twenty-First Century, Harvard University Press, 2014.