In case you missed it, right before the long Memorial Day weekend the Financial Times came out swinging against Professor Thomas Piketty’s much discussed book on inequality, Capital in the 21st Century, claiming that the data don’t show what Piketty claims they do. Today, the editorial board has doubled down on the criticisms:
The FT’s discovery of problems with Prof Piketty’s data undermines his thesis that capitalism has a natural tendency for wealth to become ever more concentrated in the hands of the rich.
Data on the distribution of wealth are notoriously unreliable, so any comparisons with more than 100 years ago must also be looked at with scepticism. Even if Prof Piketty’s figures were flawless—something which he too accepts is impossible—wealth inequalities would still be much lower than in the early 20th century. Modern America and Europe are nothing like Downton Abbey.
Other conclusions from the best-seller are also unconvincing. The FT has found grounds to question the finding that the holding of wealth by the rich in Europe has increased since 1980. Without that result, there cannot be an iron law of capitalism that leads to ever rising inequality.
The theoretical argument that wealth inequalities are likely to rise if growth rates are weak is also dubious. As Prof Lawrence Summers has argued, there are deep questions regarding the likely return to capital in coming decades and whether it will be reinvested to provide a rentier income.
Some lefties may think that of course this is what the FT would do. But in fact the newspaper is anything but a doctrinaire mouthpiece for the right. That an institution this august is going to the mat on this line suggests that the FT‘s editors have a lot of confidence in the conclusions they published over the weekend.
As for us, we’re waiting for the controversy to shake itself out before drawing our own conclusions.