Read Piketty but have questions? 'Capital in the Twenty-First Century'

"We are the 99%!"

In 2011, young Americans staged protests to occupy Wall Street. It's now said that the top 1% of wealthy Americans account for 20% of national income. Young people dissatisfied with this situation finally raised their voices.

A book offering a fresh perspective on this increasingly visible inequality issue has become a hot topic. You know it: Piketty's "Capital in the Twenty-First Century" (Misuzu Shobo). Let's take a look at this book.

Q1: What exactly is Piketty trying to say?

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Though this book is a massive 700-page tome, its argument is clear: "The capitalist system itself widens income inequality." In other words, the rich get richer, and the gap between them and others only grows.

So why does this gap widen?

The mechanism is explained by the inequality: "r (rate of return on capital) > g (economic growth rate)". The rate of return on capital refers to the return generated by capital assets like stocks and real estate, which has hovered around 4-5% since the 18th century. On the other hand, the economic growth rate indicates the increase in national income, which is around 1-2% in the long term. Indeed, this inequality holds true.

However, Piketty himself admits he doesn't theoretically understand why this is the case.

Economists have traditionally excelled at constructing theories using complex mathematical formulas. Consequently, counterarguments to Piketty's claims have flooded in.
"Couldn't the high r be the risk premium for capitalists?" "Isn't human capital excluded from the definition of capital?" and so on.

However, Piketty's approach is not theory building, but data analysis. His argument is that while the theory is unclear, collecting and analyzing 100 years of data from 20 countries worldwide yields these results. Conversely, this is precisely where its persuasive power lies.

Q2: What are the causes of inequality and how can it be addressed?

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What's interesting is how many lessons from literature are cited in this book. Take Balzac's classic "Father Goriot," for example.
This novel vividly illustrates the structure of wealth and capital, such as the young law student Rastignac being forced to choose between becoming a judge earning 1,200 francs a year or marrying the daughter of a wealthy man and gaining a fortune of 1 million francs.

Piketty likely wanted to show that economics isn't just theoretical abstraction but is deeply connected to real social life. He sounded the alarm, declaring, "It's absurd that inequality exists from the moment a person is born."

The causes of inequality Piketty identifies are complex, varying by country: issues in education, the rise of technology, super-managers born from the creation of mega-corporations, the accumulation of inherited wealth, and more.

His proposal for correcting such inequality is simple: the international community should coordinate and impose progressive taxes on capital. While this is difficult in practice, the message itself – that the problem of inequality "should be solved by all the people of the world together" – is profoundly meaningful.

Q3: What did you think after reading Piketty?

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Personally, having worked in investment banking and advertising, I'm on the labor side yet fundamentally believe in capitalism—that is, the functioning of markets. I believe this is what enables democracy and sustains people's motivation to pursue growth.

However, from a perspective distinct from economic theory, my book "Connecting Advertising" argues that economic growth alone does not equate to human happiness. For example, consider a major traffic accident. While it's a tragedy that plunges many into misery, the GDP increases due to the special demand created by rescue operations and road cleanup.

This means human happiness cannot be measured by money alone. While Piketty has shed light on how capitalism widens inequality, this widening gap is not synonymous with human happiness.

Globally, the concept of happiness is shifting beyond material wealth toward values like culture, spirituality, fairness, and environmental sustainability. While we should certainly work together to reduce inequality, I personally believe we are entering an era where we must discover values more important than monetary disparities.