Capital in the Twenty-First Century

Piketty now examines inequality concretely in terms of individuals and social groups. His core claim is that reductions in inequality in the 20th century were not a result of any “natural” or spontaneous process. Rather, “the two world wars, and the public policies that followed from them, played a central role in reducing inequalities” (297). As such, Part 3 of the text will explore the evolution of inherited wealth in contrast to income from labour. And it will do this to interrogate the assumption that modern capitalism is fundamentally meritocratic.

In chapter seven, Piketty first clarifies the types of inequality that exist. He distinguishes between three main types. The first is inequality in income from labour. For example, a manager is paid more for their labour than a waiter. Second, there is inequality in the ownership of capital, and therefore of the income from it. For example, one person may own no capital and earn no income from it, whereas someone else may own a great deal. Lastly, there is the relationship between these two dimensions of inequality. Or as Piketty frames it, “to what extent do individuals with high income from labour also enjoy high income from capital” (304)? He also notes that inequality of income from capital may be proportionally greater than inequality of capital ownership itself.