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Book Review : Capital in the 21 Century

In: Business and Management

Submitted By sypark
Words 340
Pages 2
This book points out that wealth inequality inheres in the 21 century capitalism. The author, Thomas Piketty, says the polarization of wealth has become more serious since the return on capital is bigger than the economic growth rate. Simply put, the speed at which money makes money is much greater than the speed at which labor makes money. As a result, the faster accumulation of capital is the main culprit of inequality.

South Korea is no exception. Despite of economic growth, real wage is getting smaller with inflation. It's because wages are not keeping up with inflation. Moreover, real wage has been recently far below labor productivity in Korea. That means the quality of workers' lives didn't get any better. Why doesn't firm performance lead to worker's compensation? Where has the rest of the income gone? Most of it comes to the company, and it is called as capital income.

It is not that difficult to imagine how dangerous this problem would be, when it persists and gets worse. Those who buy products are not entrepreneurs, but customers. If customers do not have enough money to purchase things, companies would not earn money too. So, it could destroy companies in the end. That is, focusing too much on growth and ignoring distribution paradoxically will hurt growth itself. Therefore, the author says that government has to do something to reduce the level of inequality.

Thomas Piketty suggests strengthening progressive tax. But I have some doubts about it. First one is that it isn't that easy to start the tax system, because it is a highly political issue. Second, it is very hard to decide the optimal level of distribution. We don't know where is a balance between growth and distribution. Lastly, I agree that companies should pay their employees enough for their contribution to firm's growth and it can be the key to more growth again. However,...

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