My chosen book of the month is Thomas Piketty’s Capital in the Twenty-First Century (Cambridge, Ma, Harvard University Press, 2014). It is said to have sold 100,000 copies already with another 100,000 on the way. Piketty is a relatively young (he was born in 1971) French economist. Having studied in France and the U.S, he now teaches at élite universities in Paris. His argument can be summed up as follows. The industrial revolution of the nineteenth century vastly increased productivity. This enabled the entrepreneurs who knew how to take advantage of it to grow immensely rich. In France they included the Schneider family of Schneider-Creusot fame. In Germany their most important representative was the Krupp dynasty; whereas the US brings to mind the likes of Eleuthère du Pont and Cornelius Vanderbilt. Not only did many of these people build up vast fortunes but they passed them to their heirs. As far as the available statistics allow us to judge the outcome, in most industrialized countries, was growing economic gaps between rich and poor.

Next, in 1913-70, the gaps closed somewhat. The main causes behind this were, first, the destruction by war of vast amounts of assets and the loss of practically all capital held abroad. This reduced the importance of the latter and turned almost all the citizens of some counties into beggars. Second came the adoption, in many countries, of socialist or quasi-socialist measures, such as progressive taxes on income and on inheritances, deliberately designed to reduce inequality. This even applied to the U.S in the form of Roosevelt’s New Deal. Finally there was the rise of the welfare state which provided services such as health and education. It also transferred wealth from some groups to others; albeit, as Piketty shows, on a much more modest scale than the common image of “the welfare mother” would suggest.

Many of these factors were linked. For example, the need for cannon-fodder was a major reason why, starting as early as the 1880s, governments, which previously had been content to perform regalian functions such as providing external and internal security and enforcing contracts, suddenly took a greater interest in the welfare of the masses. In Britain and other countries, indeed, wartime mobilization, which greatly increased both GDP and the share of taxes in it, was explicitly used as model and basis for the welfare state to come. But nothing lasts forever. Sometime between 1975 and 1980 the picture changed. Partly because of the “energy crisis” that raised the price of oil fourfold, partly for other reasons, economic growth, which during the “golden decades” from 1945 to 1973 or so had been higher than at any other time in history, slowed dramatically. Once again, return on capital began to exceed that growth; indeed, as the author himself says, the idea that it can do so on a sustained basis is the most important single aspect of his work. Consequently the share of the rich few in terms of both income and ownership rose, whereas that of the many poor declined.

As Piketty rightly points out, there was nothing inevitable in this development. Instead it was deliberately brought about, at least in part, by the likes of Ronald Reagan in the U.S and Margaret Thatcher in Britain. Behind them loomed the theories of Professor Milton Friedman of Chicago University. The objective was to end the combination of stagnation and inflation—known, at the time, as stagflation—that afflicted many countries during the 1970s and cause growth to resume. The most important measures adopted included an end to subsidies, cuts in taxation, less regulation, and privatization. Asked for their opinion, back in 2007 most people would have said that the attempt had been successful, even spectacularly so. Indeed volumes were written to show that the business cycle had finally been brought under control and that the future would bring nothing but further wealth.

It was the 2008 recession which turned the tables once more. The policies adopted in the 1980s came to be seen as a monster—my term, not Piketty’s—that threatens to turn democracy into a sham and lead to oligarchy instead. In some countries they may even bring about revolution and civil war Fortunately, Piketty says, the trend, having been deliberately created, can also be reversed. As by increasing income taxes on the rich; or designing better pension plans for the elderly so as to lift the burden currently resting on the shoulders of the working young; or putting in place a universal (it would have to be universal, to prevent people moving their assets from one country to another) on capital. The latter is clearly the author’s favorite and he devotes quite some space to explaining it.

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Needless to say, Piketty’s work is not the only one on the subject. As many reviewers have noted, its greatest advantage consists of the formidable body of statistics, collected by the author and others over many years, by which it is supported. Most pertain either to income taxes paid by individuals or to national income. Yet the numbers are not what made it a best-seller. As Piketty himself says, John Malthus’s Essay on the Principle of Population is hardly backed by any statistics at all. Yet it has now made its influence felt for over two centuries. The same applies to Adam Smith’s Wealth of Nations and many other works. The real reason behind the success of Capital in the Twenty-First Century is the fact that it has captured the Zeitgeist. In any age where growth is flagging, the income of many is steady or falling, and the future does not appear too bright, it both documents the way the world economy has been going and proposes ways to change its direction. That these proposals are likely to run, have already begun to run, into a storm of opposition on the part of conservatives hardly requires saying.

Though too complex to appeal to every Tom, Dick and Harry, on the whole the book is simply written. The author has no patience for the kind of equations econometrists love but which, in many cases, turn out to be stilts in search for nonsense to support. There is even an occasional flash of humor. Another attractive feature is the author’s modesty. The volume contains neither earth-shaking discoveries nor bombastic statements. Much less intellectual arrogance of any kind. All one finds is thorough research combined with repeated admissions that reality is far too complex for us to fully understand the present, let alone predict the future with any confidence.

If a personal word is permitted—here, of course, I can do what I please—I have met, and very much admire, Paul Kennedy. His 1987 best-seller, The Rise and Decline of the Great Powers, in some ways resembles Capital in the Twenty-First Century. While I do not agree with everything Professor Piketty wrote, I would very much like to meet him and exchange views with him. Perhaps, if I am lucky, I will.