I read an article that claimed people who buy CAPITAL IN THE TWENTY-FIRST CENTURY barely get beyond twenty pages. I can see why that might be the case. This is one hard read; it took me over a month to read it.

For one thing, Piketty has a favorite formula that he repeats constantly. I don’t have a font that will reproduce it exactly, but basically he’s saying that “the capital/income ratio is equal in the long run to the savings rate divided by the growth rate.” The closest I can get is B = s/g. If the growth rate averages around two percent (Piketty predicts 1.5 for the rest of the 21st century, large fortunes (like the Wall family’s) can average as much as six percent interest each year. They’re worth about 148 billion. Do the math.
Like the aristocrats before the French Revolution (Piketty is a French economist) they don’t have to work, and they can live on the interest. Piketty says this money should be spent on education and the infrastructure rather than just sitting there collecting interest on investments.

Another scary thought is that some countries, like Norway, have federal investment funds with capital on the order of six hundred billion dollars (because of the North Sea oil profits). If they can earn six percent for thirty years, they can start buying up other countries’ wealth in the form of corporations, buildings, raw materials, etc.

Piketty does mention an unfamiliar name he sort of blames for the trickle down philosophy. Simon Kuznets claimed that capital and labor would eventually grow closer together if given enough time. That did happen between the first World War and after the second World War. Piketty calls these wars and the Great Depression “shocks to the system”. Since Reagan and Thatcher started the conservative revolution, capital has been gaining momentum where the lower fifty percent owns virtually nothing.

Okay, we’re expecting Piketty to mention certain economic conditions like the national debt in America and Britain and the EU’s recent financial problems. Remember, he’s French, so he talks about France quite a bit. Turns out they’re pretty darn flush, but have a currency in common without a government. Piketty wants a European Parliament; I guess they have one but it’s kind of a sham. A Parliament could distribute funds and equitable taxes.

Piketty has three solutions to the national debt: Inflation, a tax on capital, and austerity. He says the worst one is austerity. Germany likes this one. Inflation paid off the enormous European debt after World War II, but it can get out of control as it did in Germany after WWI and Black Friday. He much prefers a tax on capital, as much as ten percent on the really rich. He says he’s more interested in transparency than the tax. Too many rich people are hiding their money in tax havens, and there’s a kind of economic war going on in Europe where the smaller countries like Ireland charge much lower corporate taxes. Piketty wants to know who’s got what, and he means everything: money, stocks, real estate etc. This way we could come up with a global plan to deter bubbles, recessions, and depressions.

We’ve been hearing about the Federal Reserve Board lately, mainly because of political campaigns, where libertarians insist it’s more of an evil than a help. Piketty says most rich countries have something similar, if only to deter inflation. We oldies aren’t happy because we aren’t getting any interest on our savings accounts and Certificates of deposit. But they do much more than that. Piketty says it’s impossible to return to the gold standard as it would require yearly discoveries of gold and silver. The reserve board makes loans to banks for one thing, at a very low interest these days, and (this isn’t in the book), but the reserve board takes control of failing banks and makes sure depositors get their money back.

Piketty repeats himself a lot; I think he could’ve written this book in fifty pages, but it’s still in the top ten on the New York Times non-fiction best seller list, which wouldn’t have been the case with a long article. As I’ve said his main recommendation is a tax on capital. Under our present political conditions in America, that’s just not going to happen, but he said there is hope. Who ever thought they’d get a tax on financial transactions? Unfortunately we don’t have one in America, but we pay it when we import products from Europe.

Dave Schwinghammer's unconventional novel--part mystery, part ghost story, part humor, part thematic--is available on Authorsden and at Amazon.com, new and used. Please check the reviews. Thank you.