Dr. Sam Vaknin
In his programmatic and data-laden tome, "Capital in the Twenty-first Century" (2014), Thomas Piketty makes several assertions, two of which merit a closer look: (1) That r (the return on capital) is, in the long-run always greater than g (the growth of the real economy), thus enriching the rich; and (2) that inherited wealth tends to create a "patrimonial" form of capitalism, akin to the aristocracy in the French and British ancient regimes. Putting aside the somewhat artificial and dubious distinction between the "real" and the financial economy, r and g are apples and oranges and cannot be compared. Economic growth (g) is not the return on the real economy in the same way that r is the return on capital and its assets. R is intended to compensate for a panoply of risks and is comparable to the wave function in Quantum Mechanics: it incorporates all the publicly and privately available information about future uncertainties and provides a distribution function of all plausible scenarios. Put simply: subject to political and market vicissitudes, capital can vanish overnight. Not so the real economy: it is always there, regardless of upheavals, political meddling (usually in the form of taxation), inflation (a kind of tax, really), and disruptive technologies. Capital (wealth) can be construed as a call option on the real economy and, especially, on real estate and emerging technologies. R amounts, therefore, to the premium on this option. Income inequality is growing because of the decline in the role and importance of labor, which is being gradually supplanted by capital assets, such as robots and computers as well as being offshored, outsourced, and downsized. Again, put simply; capital can buy a lot more labor nowadays, hence the apparent lopsidedness of the distribution of wealth. Luckily for the 99%, the bulk of the nation's wealth is inactive: dormant in deposits and other long-term assets or languishing in hordes of cash in the form of non-distributed profit
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