From Jeffrey Frankel:
It is true that capital’s share of income interest, dividends, and capital gains rose gradually in major rich countries during the period 1975-2007, while labor’s share wages and salaries fell, a trend that would support Piketty’s hypothesis if it continued…..
But interest rates have been at all-time lows in recent years – virtually zero. And the claim that in the long run the interest rate must be substantially greater than the economic growth rate is absolutely central to Piketty’s book.
That said, Piketty’s vision is focused squarely on the truly long run….Three century-long movements constitute the essence of the book: a rise in inequality in the nineteenth century, a fall in inequality in the twentieth century, and a predicted return to historically high inequality in the twenty-first century.
To me Piketty started with a preconceived idea and selected data to support this. He seems to ignore the impact of industrialization in the 19th century and technological advances in the late 20th century as sources of wealth creation, as well as access to low-cost labor through globalization during the latter period which has eroded manufacturing jobs and real wages.
Read more at Piketty’s Missing Rentiers by Jeffrey Frankel – Project Syndicate.
