CAPITAL in the Twenty-First Century

By Thomas Piketty

Harvard University Press

The overall conclusion of this study is that a market economy based on private property, if left to itself, contains powerful forces of convergence, associated in particular with the diffusion of knowledge and skills; but it also contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based.

The principle destabilizing force has to do with the fact that the private rate of return on capital, r, can be significantly higher for long periods of time than the rate of growth of income and output, g.

The inequality r>g implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental legal contradiction. The entrepreneur inevitably tends to become a rentier, more and more dominant over those who own nothing but their labor. Once constituted, capital reproduces itself faster than output increases. The past devours the future.

The consequences for the long-term dynamics of the wealth distribution are potentially terrifying, especially when one adds that the return on capital varies directly with the size of the initial stake and that the divergence in the wealth distribution is occurring on a global scale.

The problem is enormous, and there is no simple solution.

Many people worry that moving toward greater cooperation and political integration within, say, the European Union only undermines existing achievements (starting with the social states that the various countries of Europe constructed in response to the shocks of the twentieth century) without constructing anything new other than a vast market predicated on ever purer and more perfect competition. Yet pure and perfect competition cannot alter the inequality r>g, which is not the consequence of any market “imperfection.” On the contrary. Although the risk is real, I do not see any genuine alternative: if we are to regain control of capitalism, we must bet everything on democracy.


By Don McCanne, MD

Although the English translation of Thomas Piketty’s “CAPITAL in the Twenty-First Century” was published only this month, it has already become a classic in the economics literature. This book is not about health care, but it provides us with an excellent background for understanding why we need to reform our current health care financing system. It is a must read, not just for those advocating for health care reform, but for everyone.

Our health care system is designed to support rentiers. Current trends in income and in wealth accumulation indicate that a disproportionate share of global income will continue to shift more and more to the control of the rentiers. We are already seeing a relative decline in financing of health care for wage earners, manifested by higher cost sharing and by more limited access through narrower, lower-cost provider networks.

Piketty shows us how the concentration of capital at the top drives an ever greater percentage of income upwards, with the rentiers having to do nothing further to accomplish that feat. He explains how the solution is progressive income taxes and progressive wealth taxes.

Expanding progressive financing through single payer would provide a step forward in implementing solutions to the iniquities of concentrated wealth. And it would be a significant move since health care constitutes such a large part of our GDP.

Without intervention, there is the risk of major social disruption. If we wish to avoid this, people are going to have to rediscover democracy. As Thomas Piketty says, “if we are to regain control of capitalism, we must bet everything on democracy.”

Re-posted with permission from