Money Observer: What Piketty has in common with reality TV

MIM capital income

‘Who says a reality television show can’t convey an important message?’ asked my friend Elly Steinberg, who is a documentary film-maker.

She was referring to The Great British Benefits Handout on Channel 5, where three unemployed families who live on benefits were each given £26,000. Some of them managed to get a business off the ground, invest in education and become self-sufficient.

The important message conveyed by the show can be found in Thomas Piketty’s book Capital in the Twenty-First Century. In this scholarly tome, which continues to be a bestseller, the French economist argues that capital that is invested – whether in the stock market or in property – grows faster than income.

He argues that as most people rely on their income to live on, they will never be able to catch up with the wealth generated by a formidable flat or share portfolio. That’s because wealth grows quicker than the economy – it’s a structural characteristic of capitalism.

The implications are profound, because the dominance of capital over income means the notions that we live in a meritocracy and enjoy social mobility are mistaken.

The UK has some of the lowest rates of social mobility in the developed world. And globally, just eight men own 50 per cent of the world’s wealth.

According to Piketty, it’s not the labour market or people’s shortcomings that create wealth disparity, but the good fortune of an initial endowment.

By giving three families some capital, the television show demonstrates what can happen when the scales are tipped.

This column was originally published as part of the Marina’s Imaginary Millions column in Money Observer, September 2017:

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