Two letters explain why old money outgrows new work
Thomas Piketty's central inequality isn't a metaphor, it's an arithmetic condition with three centuries of data behind it.
The core claim of Capital in the Twenty-First Century compresses into a single inequality: r > g. The return on capital, rent, dividends, interest, the yield on already-owned wealth, tends to run higher than g, the overall growth rate of the economy. That gap sounds small on paper. Piketty's data shows it isn't.
When capital's return consistently outpaces growth, fortunes that are simply reinvested, generation after generation, compound faster than the economy that everyone else's wages are tied to. Piketty's calculations suggest a shift in that gap from two to three percentage points is enough to move a society from the moderate wealth concentration of Europe or the U.S. today toward something closer to pre-World War I Europe, where inheritance, not entrepreneurship, not effort, did most of the explanatory work for who ended up wealthy. The twentieth century looked more equal mainly because two world wars and the Depression physically destroyed capital on a scale nothing since has repeated.
Which means the postwar decades many people treat as economic "normal" may have been the historical exception, not the rule Piketty expects going forward.