Inequality Zingers from Thomas Piketty's Capital in the 21st Century
Thomas Piketty, Capital in the Twenty-First Century (Belknap Press: Cambridge, MA, 2014)
• The US “The top decile as much as 45-50 percent of national income in the 1910s-1920s before dropping to 30-35 percent by the end of the 1940s. Inequality then stabilized at that level from 1950 to 1970. We subsequently see a rise in inequality in the 1980s, until by 2000 we have returned to a level on the order of 45-50 percent of national income.” 23 • “National income is defined as the sum of all income available to the residents of a given country in a given year, regardless of the legal classification of that income.”43 • “In this book, capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including residential real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents, and so on) used by firms and government agencies.” 46 • “In countries where income from labor is most equally distributed, such as the Scandinavian countries between 1970 and 1990, the top 10 percent of eraners receive about 20 percent of total wages and the bottom 50 percent about 35 percent.” 255 • Inequality of Labor Income: (page 247 table 7.1) o EU in 2010: Top 1%: takes home 7% of wages Next 9%: take home 18% Top 10%: takes home 25% of wages Middle 40%: takes home 45% of wages Bottom 50%: take home: 30% o USA in 2010 Top 1%: takes home 12% of wages Next 9%: take home 23% Top 10%: takes home 35% of wages Middle 40%: takes home 40% of wages Bottom 50%: take home: 25% • Inequality of Capital Ownership: (page 248 table 7.2) o In EU 2010: Top 1%: own 25% of capital Next 9%: own 35% of capital Top 10%: own 60% of capital Middle 40%: own 35% of capital Bottom 50%: own 5% of capital o In USA 2010: Top 1%: own 35% of capital Next 9%: own 35% of capital Top 10%: own 70% of capital Middle 40%: own 25% of capital Bottom 50%: own 5% of capital • Inequality of Total Income (labor + capital): (page 249 table 7.3) o In EU 2010: Top 1%: receive 10% of total income Next 9%: receive 25% of total income Top 10%: receive 35% of total income Middle 40%: receive 40% of total income Bottom 50%: receive 25% of total income o In USA 2010 Top 1%: receive 20% of total income Next 9%: receive 30% of total income Top 10%: receive 50% of total income Middle 40%: receive 30% of total income Bottom 50%: receive 20% of total income • “Currently, in the early 2010s, the richest 10 percent own around 60% of national wealth in most European countries, and in particular in France, Germany, Britain and Italy.”257 • “The poorest 50% invariably own less than 10 percent of national wealth, and generally less than 5 percent.” 257 • “In France … the richest 10 percent command 62 percent of total wealth, while the poorest 50% own only 4 percent.” 257 • “In the United States … indicates that the tpo decile own 72 percent of America’s weath, while the bottom half claim just 2percent.” 257 • “In more inegalitarian societies, the top decile claimed as much as 50 percent of national income (with about 20 percent going to the top centile). This was true in France and Britain during the Ancien Regime as well as the Belle Epoque and is true in the US today.” 263 Structure of Inequality in US today: • “… two types of hyperinegalitarian society – a society of rentiers and a society of supermanagers … the two types of inequality can coexist: there is no reason why a person can’t be both a supermanager and a rentier – and the fact that the consentration of wealth is currently much higher in the US than in EU suggests that this may well be the case for the US today.” 265 • “And of course there is nothing to prevent the children of supermanagers from becoming rentiers. In ractice we find both logics at work in every society.” 265 • “What primarily characterizes the US at the moment is a record level of inequality from labor (probably higher than in any other society at any time in the past, anywhere in the world, including societies in which skill disparities were extremely large) together with a level of inequality of wealth less extreme than the levels observed in traditional societies or in EU in the period 1900-1910.” 265 • “To a large extent we have gone from a society of rentiers to a society of managers, that is, from a society in which the top centile is dominated by rentiers (people who own enough capital to live on the the annual income from their wealth) to a society of in which the top of the income hierarchy; including to upper centile, consists mainly of highly paid individuals who live on income from labor.” 278 • From figure 8.5: o Share of top decile in national income in 1928: just shy of 50% o Share of top decile in national income in 2008: just shy of 50%. o In 2010 around 47% o “The top decile income share rose from less than 35 percent of total income in the 1970s to almost 50 ercent in the 2000s-2010s.” 291 Explosion of inequality since 1980 • “Since 1980, however, income inequality has exploded in the US. The upper decile’s share increased from 30-35 percent of national income in the 1970s to 45-50 percent in the 2000s – an increase of 15 points of national income.”294 • “If change continues at the same pace, for example, the upper decile will be raking in 60 percent of national income by 2030.” 294 • “The upper decile’s share slightly exceeded 50 percent of US national income on the eve of the financial crisis of 2008 and then again in the early 2010s.” 295 • “Capital gains in the US reached unprecedented heights during the Internet bubble in 2000 and then again in 2007: in both cases, capital gains alone accounted for about five additional points of national income for the upper decile, which is an enormous amount.” 295 • “The bulk of the growth of inequality came from “the 1 percent” whose share of national income rose from 9 percent in the 1970s to about 20 percent in the 2000-2010 … an increase of 11 points.” 296 • “Of the additional 15 points of national income going to the top decile, around 11 points, or nearly three-quarters of the total, went to “the 1 percent”, … of which roughly half went to “the 0.1 percent.” 296 • “One consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the US, which inevitably made it more likely that modest households would take on debt, especially since unscrupulous banks and financial intermediaries, freed from regulation and eager to earn good yields on the enormous savings injected into the system by the well-to-do, offered credit on increasingly generous terms.” 297 • “If we consider the total growth of the US economy in the thirty years prior to the crisis, that is, from 1970 to 2007, we find that the richest 10 percent appropriated three-quarters of the growth. The richest 1 percent alone absorbed nearly 60 percent of the total increase of US national income in this period.” 297 • “A very substantial and growing inequality of capital income since 1980 accounts for about one-third of the increase in income inequality in the US –a far from negligible amount.” 300 Supermanagers • “The vast majority (60 to 70 percent …) of the top 0.1 percent of the income hierarchy in 2000-2010 consists of top managers. By comparison, athletes, actors and artists of all kinds make up much less than five percent of this group. In this sense inequality has much more to do with the advent of supermanagers than with that of superstars.” 303 • “80 percent of the top income groups are not in finance, and the increase in the proportion of high-erning Americans is explained primarily by the sky-rocketing pay packages of top managers of large firms in the nonfinancial as well as financial sectors.” • “In short, two distinct phenomena have been at work in recent decades. First, the wage gap between college graduates and those who go no further than high school has increased, as Goldin and Katz showed. In addition, the top 1 percent (and even more the top 0.1 percent) have seen their remuneration take off.” 315 • “Broadly speaking the rise of supermanagers is largely an Anglo-Saxon phenomenon.” 315 • “From a macroenconomic point of view, however, the explosion of very high incomes has been impressive, to be sure, ut too few people have been affected to have had an imact as powerful as in the US. The transfer of income to “the 1 percent” involves only two or three points of national income in continental EU and Japan compared with 10 to 15 points in the US -5 to 7 times greater.” 320 Inequality in Emerging Economies • Share of national income: “In the 1980s, the top decile’s share rebounded, and today it stands at about 15 percent of national incme (12-13 percent in India and Indonesa and 16-18 percent in S. Africa and Argentina.” 326 • “Colombia … is one of the most inegalitarian societies … the top centile’s share stood at about 20 percent of national income throughout the period 1990-2010 … this level of inequality is even higher than that attained by the US in 2000-2010, at least if capital gains are excluded; if they are included, the US was slightly ahead of Colombia over the past decade.” 327 • From figure 9.9 “Income Inequality in Emerging Countries, 1910-2010 Top 1% (page 327 o Colombia in 2010: Around 22% o S. Africa in 2010: Around 16% o Indonesia in 2010: Around 13% o India in 2010: Around 10% o China in 2010: Around 11% • “Income inequality in the US in 2000-2010 attained a level higher than that observed in the poor and emerging countries at various times in the past – for example, higher than in India or S. Africa in 1920-1930, 1960-1970, and 2000-2010.” 330 Inequality of Capital Ownership • Figure 10.3 Wealth inequality in Britain, 1810-2010. “The top decile owns 80-90 percent of total wealth in 1810-1910, and 70 percent today.” 344 o Top 1 percent owns around 28-29 percent of wealth. • Figure 10.4 Wealth inequality in Sweden, 1810-2010. “The top 10 percent holds 80-90 percent of total wealth in 1810-1910 and 55-60 percent today” 345 o Top 1 percent own 20-21 percent • Figure 10.5 Wealth Inequality in the US, 1810 -2010. “The top 10 percent wealth holders own about 80 percent of total wealth in 1910 and 75 percent today.” 348 o Top 1 percent owns almost 35 percent • Figure 10.6 Wealth inequality in EU versus US, 1810 – 2010 page 349 o Top 10 percent share of wealth in EU in 2010: almost 65% o Top 10 percent share of wealth in US in 2010: just over 70% o Top 1 percent share of wealth in EU in 2010: around 25 % o Top 1 percent share of wealth in US in 2010: almost 35%
Thomas Piketty, Capital in the Twenty-First Century (Belknap Press: Cambridge, MA, 2014)