Page 100 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

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“True innovation and job creation is in poor correlation to the compound annual growth rate experienced over the last 15 years by the constituents of the Forbes list.”
capitalist argument is based on the idea that the rich deserve their riches because they make the world a better place – as we said, creating jobs, enhancing e ciency, innovating.
To make his point, Piketty chooses to compare the increase in wealth of Bill Gates to the gains made by Liliane Bettencourt, the heiress to the L’Oreal empire, and the wealthiest French citizen alive today. Roughly speaking, over the same period, Bill Gates went from a net worth of USD 20 billion to USD 80 billion, whereas Bettencourt went from an inherited fortune of USD 10 billion to her net worth today of USD 40 billion. e relative capital gain in both cases is the same, in spite of the fact that Gates built value through Microsoft whereas Bettencourt inherited value through L’Oreal.
To Piketty’s mind, this is evidence that free-market capitalism is a system that is out of control. ere are a disproportionate number of names in the list whose wealth has simply been inherited. True innovation and job creation is in poor correlation to the compound annual growth rate experienced over the last 15 years by the constituents of the Forbes list.
Piketty has become somewhat notorious for his suggestion of a particular solution. He has been vili ed by free-market economists for ‘mistakes’ in his data, cruci ed by capitalist commentators and their publishers as a communist, and adopted as a sort of intellectual version of a 21st Century Che Guevara by left-wing political elite, in countries such as Bolivia and South Africa.
His suggestion is simple and politically unlikely. He recommends a progressive capital gains tax of 10 percent per annum, rather than the obsession in Western society with death tax. He advocates the erosion of Bettencourt’s wealth during her lifetime, quite simply, rather than after it.
Capital Gains Tax in Action for Bettencourt
If one were to apply his progressive capital gains tax retrospectively to Bettencourt, one derives some interesting results. Imagine a hypothetical scenario in which Bettencourt had received her inherited wealth in L’Oreal stock and then, for the past fteen years, the stock had neither lost nor gained value at all. Now imagine that she had been subject to Piketty’s capital gains tax. In this scenario, Bettencourt’s wealth would have been whittled down to a paltry USD 2 billion from her original
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