"The crux of his argument is a deceptively simple formula: r > g, where r stands for the average annual rate of return on capital (i.e. profits, dividends, interest, and rents) and g stands for the rate of economic growth. For much of modern history, he contends, the rate of return on capital has hovered between 4 and 5 percent, while the growth rate has been decisively lower, between 1 and 2 percent. (Piketty makes a compelling case that economic growth, which depends in good part on population growth, is unlikely to accelerate dramatically anywhere but in Africa, given current demographic trends.) Thus he adduces capitalism’s "principal destabilizing force": Whenever r > g, "capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based."
So the r>g makes a lot of sense, but it seems to assume that fortunes only grow. In real life they tend not to.
What I mean is that there are destabilizing/deconcentrating forces in an economy in addition to stabilizing/concentrating ones. Like companies going bankrupt or entire industries being displaced by new ones.
If you're worth $100mm it's not because you have a million hundred dollar bills in a vault, or hundreds of pounds of gold or a bank account with many zeros on it. You've got the money tied up in businesses that yield that r which is greater than g. And that SHOULD expose you to risks which could cause you to lose your money. In the last 20 or so years it seems like that exposure has been largely mitigated at least in the US which is quite unfortunate.
The other thing that strikes me is it kind of makes the assumption that only the rich (or capital) can participate in the r>g phenomena. With interest rates at less than 1% (and probably negative re:inflation) it doesn't make any sense for a normal person to save money. But what if inflation is 2% and real interest rates are 6%? Can the regular folk not participate in that as well?
Compound interest alone will propel the rich further and further ahead.
But being rich also gets you access to shortcuts, investment opportunities and advisors no one else can call on. They insulate you from risk and target tax loopholes to help.
When that fails you have access to political insight and levers.
Now that was fascinating