THE FRENCH ECONOMIST Thomas Piketty’s new 700-page book, Capital in the Twenty-first Century, has become a surprise best-seller and subject of much praiseworthy comment. Reviewers have called it “seminal,” “definitive,” “a tour de force.” And so it is.
What’s so extraordinary about this book is that, to the extent that a social scientist can prove anything, Piketty has proven that widening inequality is inherent in capitalism. This isn’t a new notion, but Piketty—by using decades of economic data—leaves no room for doubt.
And Piketty doesn’t just marshal evidence; he explains why capitalism works as it does. The reasons wealth inexorably concentrates under capitalism are that (1) financial capital grows at a faster rate than the economy as a whole, and (2) those who already own capital therefore get ever richer than those who don’t.
NOW THAT Piketty’s work has grabbed our attention, where do we go from here? Piketty’s proposed solution to capitalism’s ever-widening wealth gap is a global wealth tax and high national income tax rates on the very rich.
But that’s not the only way to reduce inequality. Nor is it really a complete solution because it doesn’t insure that more income will flow to the non-wealthy. An alternative is to use co-owned wealth to pay equal dividends to all.
Dividends of this sort aren’t redistribution; they’re a way to allocate income fairly in the first place so that there’s less need to redistribute later. What’s more, like social insurance, a universal dividend system can be built in stages. For example, it can start with dividends from atmospheric pollution fees and grow from there.