A 700-page book on economics is not exactly a light read for someone with a background in environmental sciences, but after all this success, discussions and reviews, I felt I had to read Capital in the Twenty-First Century. I borrowed it from the library and I am glad I did. There have been plenty of reviews, critiques and a variety of arguments for and against, but, to me, the real importance of the book lies in just a few pages where the author discusses the forces of convergence that have led to decreasing inequality.

Thomas Piketty’s central argument is that when the returns on capital (r) outpace economic growth (g), {r>g} over time, wealth inequality increases and therefore, those who control wealth will always get richer and those who depend on the growth of the economy, the labour, will always be poorer compared to the rich. Piketty’s suggestion that a global tax of up to 2% a year should be introduced on individual wealth to prevent capital concentrating in the hands of the few has been controversial but there has been no real attack. One of the problems with the global tax is that it requires a high level of international cooperation.  Some, Bill Gates included, have suggested a progressive tax on consumption instead.

Inequality  is one of the biggest challenges facing the world  today. A high level of inequality does not affect only the poor, but can be detrimental to growth, stability and well-being in general. The demand for governments to tackle extreme inequality is growing.

 Forces of Convergence

Thomas Piketty suggests that there are two forces of convergence that could decrease inequality, both within and between nations. One is the diffusion of knowledge and two, investing in people. In his own words:

“The main forces for convergence are the diffusion of knowledge and investment in training and skills. The law of supply and demand, as well as the mobility of capital and labour, which is a variant of that law, may always tend towards convergence as well, but the influence of this economic law is less powerful than the diffusion of knowledge and skill and is frequently ambiguous or contradictory in its implications. Knowledge and skill diffusion is the key of the overall productivity growth as well as the reduction of inequality both within and between countries.”

Knowledge transfer and diffusion can generate innovative ideas for the 21st century. But we need to accelerate the process of diffusion and find even better ways to include people and improve their skills. Piketty says,

“.... the principal force for convergence –the diffusion of knowledge– is only partly natural and spontaneous. It also depends in large part on educational policies, access to training and to the acquisition of appropriate skills, and associated institution.”    

In 1786, Thomas Jefferson, said,

"I think by far the most important bill in our whole code is that for diffusion of knowledge among the people. No other sure foundation can be devised for the preservation of freedom and happiness”