Analysis Of Piketty's 'Capital In The Twenty 21st Century'

조물주 위에 건물주(Building owner above the Creator). I use this joke, which I read it from somewhere, often. My people loved the sarcasm under this phrase. It reflects many people’s desire to be a building owner who earns rents. People started to feel the property (capital) is important to become rich. We somehow started to grasp the idea that it is not own effort and talent but how much wealth we own from the beginning decides our wealth. This feeling is proven by Piketty in his book ‘Capital in the twenty first century’. Piketty divides income in two, the wage and the capital. Then, explains how each plays role in inequality. The large gap in wage includes political reasons. Capital includes both natural and political reason. Accumulated capital
Piketty analyzed the rapid wage raise in America. The increase in wage inequality in the United States is due mainly to the increased pay at the very top end of the distribution. (Piketty, 314) Figure 8.8 shows that the wage raise in top 1% drived the higher income of 1%. He claims the widely accepted theory, a race between education and technology does not explain the huge wage American supermanager receives. Rather, a worker’s productivity is not immutable, objective quantity inscribed … the relative power of different social groups often plays a central role in determining what each worker is paid. (Piketty, 305) The high wage supermanager receives is not because of their efficiency but their power to decide how much their own wage. Piketty does not deny in the long term, the advanced technology does create new jobs. Creating new high wage receivers according to their proficiency. However, in the short term, structure decides wage distribution. As counter argument of proficiency theory, Piketty says, the wage raise of top decile should rise equally according to their proficiency. Furthermore, the wage raise of managers all over the world should be
But the concentration of capital is the stronger factor in high inequality because it is very easy for the mass capital to enrich itself. At this point, Piketty analyzes the role of inheritance compare to savings to suggest the importance of the accumulated wealth. But before, there is a need to see the relationship between the rate of return on capital (r) and the growth rate (g). Piketty argues the accumulation of wealth is natural through r and g relationship. If the difference between the two is large, past wealth is accumulated faster than the economic growth. For example, if g=1% and r=5%, saving one-fifth of the income from capital is enough to ensure that capital inherited from the previous generation grows at the same rate as the economy.(Piketty, 351) Piketty provides graph comparing the r and g. Only except 1913 to 2012 because of tax imposed on capital and unprecedented high growth rate, the pure rate of capital was always higher than g. The existence of higher capital rate highlight this is natural incident, not related to any market rules. In other words, freer market doesn’t involved in this