Page 77 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

In interviews outside the realms of his book, he has raised examples such as Liliane Bettencourt, the heiress to the L’Oréal empire, who inherited her wealth and thereafter experienced the same rate of return on her capital that Bill Gates – an entrepreneur from the start – experienced on his capital. Data from a study completed by the Oxford Quarterly Journal of Economics shows that French annual inheritances have tripled from less than 5 percent of GDP in the 1950s to about 15 percent of GDP today moving closer to the 19th-century peak of 25 percent. Ultimately, Piketty argues, capitalist forces have resulted in a society of rentiers – people living on income from property or investments – people unlikely to innovate or advance society. Overall, his thesis suggests that capitalism as an economic system is not working and will result in low growth, high levels of inequality and low levels of social mobility. If you are not born into wealth then life, even for the best educated, will be something akin to how Jane Eyre felt without a Mr. Rochester.
Capital
In Capital, Piketty uses the Forbes Rich List, an annual list of the world’s richest billionaires (up to and including 2013/2014), as an example of how concentrated wealth has become. He calculates that over the last 30 years, the top 400 richest families in the world – irrespective of each year’s annual constituents – have experienced an annual growth rate substantially exceeding the world economic growth rate. He uses this case as an example of how, if extrapolated, the top 400 families in the world would own just about everything by the year 2050.
However, if one analyses the Forbes 2016 Rich List, there are two problems with Piketty’s underlying thesis: namely that the constituents of the list change quite dramatically over time, suggesting that although overall wealth is concentrated, it is not concentrated in the same hands. Secondly, on closer inspection, one will nd the following: Bill Gates was named the richest man in the world by Forbes’ 2016 list. is was the 16th time that the founder of Microsoft claimed the top spot with USD 75 billion. Following behind him on the list with USD 67 billion is Amancio Ortega, the Spanish retail genius who started Zara, with less than USD 100. Both Gates and Ortega are self-made billionaires. In fact, the rst eight of the world’s richest people are entrepreneurs. ey did not start with large chunks of inheritance but made their way up the ranks with hard work and focus. Tied at 9th place is Charles and David Koch who inherited the family business when it was worth
“Ultimately, Piketty argues, capitalist forces have resulted in a society of rentiers – people living on income from property or investments – people unlikely to innovate or advance society.”
pIKetty: pRofIle of AN ecoNomIc ImpeRIAlISt
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