Capital in the Twenty-First Century, by Thomas Piketty (Harvard, 696 pp., $39.95)
In the mid 1950s, Simon Kuznets published historical data on the distribution of income in the United States, covering a 35-year period beginning in 1913. This was the first time any such statistics had been compiled for analysis, and they showed a sharp reduction in inequality over that period. In subsequent work, Kuznets argued that income inequality is likely to increase when countries begin to industrialize and experience economic growth, but that eventually the trend in income inequality begins to reverse. This bell-shaped relationship between economic growth and inequality became known as the Kuznets curve, and it broadly represented evidence that economic growth would ultimately and automatically solve problems of income inequality.
In his new book, Thomas Piketty compiles data on income inequality across countries and across much longer time horizons than Kuznets did. For some countries, he presents centuries of data. What Piketty finds is that while Kuznets was correct about income inequality for the period he examined, the implications of the Kuznets curve do not hold. Using the share of income earned by the top 10 percent of income earners as his measure of inequality, Piketty shows that income inequality declined beginning in the late 1930s and early 1940s, but began rising again in the late 1970s and early 1980s. This pattern of inequality is not confined to one particular country, but rather is broadly apparent across developed countries over the course of the 20th century.