The two World Wars, as Piketty puts it, reset the economic counters for Europe. During the period of "reconstruction capitalism" Europe was operating from a low capital base. To encourage growth, capital taxation became increasingly progressive. For years economic growth mirrored, or even surpassed, the rate of return on capital. This led to a leveling effect whereby income hierarchies became more egalitarian. To a certain extent similar events were taking place in the US - though with less drastic results. By the end of the 1970s the capital stock had been largely replenished and growth began to slow. This was bound to occur as Europe was no longer in the postwar, rebuilding, decades. Simultaneously, demographic growth in the Western world began to fall off, further impacting economic growth. As slowing growth became associated with higher levels of public capital - particularly in the US and Britain - a wave of privatization and an increased emphasis on boosting economic growth through the extension of capital seemed to support a new narrative of privatization and supply-side economics. This narrative aside, Piketty conclusively shows that the rate of economic growth has lessened since 1980. Because of the refortification of capital as an economic driver, what growth there has been is increasingly concentrated in the hands of the few (those who own large amounts of capital and are able to reinvest higher rates of their capital stock).
What is crucial in Piketty's analysis is that this history is not predicated upon illusory laws of economics. At turns he takes on the claims of the Kuznet's Curve, infinite accumulation, the Pareto effect, marginal productivity, and the Cobb-Douglas hypothesis. In each case he demonstrates how an inadequate appreciation for history in the long-run gave rise to these 'laws' of economics. No fire-brand, throughout the work Piketty is measured and circumspect in his conclusions, simply wishing the same from his fellows. In looking across the last two hundred years, Piketty makes the convincing claim that economics and politics are inextricably linked together. It is because of the politics and actions of political actors (war too is a political action) that the twentieth century became a period defined by a certain type of economic growth. Similarly, there is nothing immutable about how the returns of capital will be distributed. We have begun, so Piketty argues, to reenter a period in which the concentration of wealth more closely resembles the robber baron era of the late 19th century. This will have, indeed, already has, far-reaching implications for society.
Piketty raises the question: what type of society do we wish to live in? His historical review of capital makes it clear that our history will be of our own making. To continually remake society as we see fit requires both an appreciation for where we want to go and for where we have been. Piketty speaks to both the past and the future, and his work serves as a resource for those of us interested in both.
