It would be a mistake to attempt, as many bloggers, pundits, and commentators have done, to summarize such a vast collation of history and data as we find in Piketty’s Capital into a single simple argument, which can then be discredited by one fell swoop of counter-evidence.  It is a sprawling work composed of dozens of theses and sub-theses, supported by many different sources and types of data.  However, the basic gist is fairly straightforward and intuitive, and worth grasping for those who don’t have time to read the whole book.  It is best stated in his own words:

“When the rate of return on capital significantly exceeds the growth rate of the economy (as it did through much of history until the nineteenth century and is likely to be the case again in the twenty-first century), then it logically follows that inherited wealth grows faster than output and income.  People with inherited wealth need save only a portion of their income from capital to see that capital grow more quickly than the economy as a whole.  Under such conditions, it is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime’s labor by a wide margin, and the concentration of capital will attain extremely high levels—levels potentially incompatible with meritocratic values and principles of social justice fundamental to modern democratic societies.

What is more, this basic force for divergence can be reinforced by other mechanisms.  For instance, the savings rate may increase sharply with wealth.  Or, even more important, the average effective rate of return on capital may be higher when the individual’s initial capital endowment is higher (as appears to be increasingly common).  The fact that the return on capital is unpredictable and arbitrary, so that wealth can be enhanced in a variety of ways, also poses a challenge to the meritocratic model. . . .

To sum up what has been said thus far: the process by which wealth is accumulated and distributed contains powerful forces pushing toward divergence, or at any rate toward an extremely high level of inequality.  Forces of convergence also exist, and in certain countries at certain times, these may prevail, but the forces of divergence can at any point regain the upper hand, as seems to be happening now, at the beginning of the twenty-first century.  The likely decrease in the rate of growth of both the population and the economy in coming decades makes this trend all the more worrisome.

My conclusions are less apocalyptic than those implied by Marx’s principle of infinite accumulation and perpetual divergence (since Marx’s theory implicitly relies on a strict assumption of zero productivity growth over the long run).  In the model I propose, divergence is not perpetual and is only one of several possible future directions for the distribution of wealth.  But the possibilities are not heartening.  Specifically, it is important to note that the fundamental r > g [return on capital is greater than the economic growth rate] inequality, the main force of divergence in my theory, has nothing to do with any market imperfection.  Quite the contrary: the more perfect the capital market (in the economists’ sense), the more likely r is to be greater than g.  It is possible to imagine public institutions and policies that would counter the effects of this implacable logic: for instance, a progressive global tax on capital.  But establishing such institutions and policies would require a considerable degree of international coordination.  It is unfortunately likely that actual responses to the problem—including various nationalist responses—will in practice be far more modest and less effective.

. . .

In the late nineteenth century, conservative French economists such as Paul Leroy-Beaulieu often used this argument to explain why republican France, a nation of ‘small property owners’ made egalitarian by the Revolution, had no need of a progressive or confiscatory income tax or estate tax, in contrast to aristocratic and monarchical Britain.  The data show, however, that the concentration of wealth was as large at that time in France as in Britain, which clearly demonstrates that equality of rights in the marketplace cannot ensure equality of rights tout court. [italics mine]  Here again, the French experience is quite relevant to today’s world, where many commentators continue to believe, as Leroy-Beaulieu did a little more than a century ago, that ever more fully guaranteed property rights, ever freer markets, and ever ‘purer and more perfect’ competition are enough to ensure a just, prosperous, and harmonious society.  Unfortunately, the task is more complex.” (pp. 26-27, 30)