Divided We Stand Summary

Background and Introduction
Inequality and policies to restore equal opportunities have moved to the forefront of the political debate in many countries since the OECD published its 2011 Report, entitled, “Divided We Stand: Why Inequality Keeps Rising”, (OECD, 2011). The report states that “For the first time ever, the wealth gap grew more in the Nordic region and Germany than anywhere else in the “traditionally low-inequality countries” during first decade of the 21st century and one reason is that the wages of the top 10 percent have been rising faster than pay for the middle class. This paper examines the claim by Thomas Piketty that, “Capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which

The American President, Barack Obama, recently described inequality as the “defining issue of our time”. This paper discusses whether the evidence of changing patterns of inequality in the OECD Countries since 1980 supports Piketty’s claim based on his recent book entitled Capital in the Twenty-First Century, (Piketty, 2014a). The book looks at data from some two dozen countries and covers the period from the 17th century; and considers wealth in terms of assets as well as incomes. Piketty’s book makes a major contribution by putting forward a theory of natural economic evolution under capitalism (Saez, 2013). His dire prediction of more economic inequality in the future and his proposed remedy: a global tax on wealth has been well received by the political left, and as can be expected, his work and conclusions have received very strong criticisms from the political right (he has been described as an unrealistic or confused Marxist). His work which predicts increasing inequality represent a challenge both to “convergence” theories and to the notion that levels of inequality tend to decline over time. This paper examines the key arguments for and against