Get the latest market trends in your inbox

Stay on top of the latest market trends and economic insights with the Axios Markets newsletter. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Minneapolis-St. Paul

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa-St. Petersburg news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa-St. Petersburg

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Janerik Henriksson / AP

Thomas Piketty's 2014 book, Capital in the 21st Century, is the rarest of tomes — a 700-page best-seller on economic theory. The French economist was transformed into an international celebrity, arguing with uncanny timing that economic inequality has worsened since the 1970s, and contributed to social and political instability. The political upheaval of the last year has only made him seem more prescient.

But there is much debate over Pikkety's central premise explaining why inequality has grown worse. Among those challenging Piketty is Devesh Raval, an economist with the Federal Trade Commission, who tells Axios that the Frenchman wrongly blamed automation. Instead, says Raval, the culprit is globalization.

Between the lines: If Raval is right, and not Piketty, then we have already seen the worst, and inequality should stop becoming exacerbated. "If globalization and trade are the culprit, most of those effects should have already happened," Raval says.

In his book, Piketty argues that, absent major corrective events like destructive wars or aggressive government action, capitalist countries will always generate extreme inequality of income and wealth.

  • As an example, Piketty pointed to real estate. He said that rental income earned on a piece of property generally grows faster than the economy, and that this leads to the concentration of wealth and income in fewer and fewer hands. Prospective home buyers may have noticed this effect in today's housing market, in which the average home is three times more expensive, relative to the typical wage, than in the 1970s.
  • Piketty broadens out the argument: He says to expect this shift of wealth to continue as AI and automation technology enable robots and algorithms to do an increasingly wide range of tasks.

Not so fast: Raval argues that the data don't corroborate Piketty's thesis. Automation, he argues, hasn't increased the interchangeability of humans with machines. Instead, what we have watched is the one-time effects of radical post-war globalization.

  • Radical globalization: Chinese investors can now bid up real estate prices, Raval notes, and American businessmen can easily source their wares from low-wage Vietnam, both changes that have hurt workers. The upside, he argues, is that many of these shifts are one-offs that won't continue to suppress workers' share of income.
  • Looking ahead: Although Raval says automation isn't causing labor's share of income to decline, he concedes that new technologies could drive down pay. Raval writes, "If Piketty's feared scenario comes to pass," in which machines can increasingly replace labor, and population growth continues to slow, standard economic models say the world "would experience unbounded growth," he said. In other words, the economy could grow while people contribute no new innovations.

Why it matters: If automation is the culprit, as Piketty argues, we can expect the disruptions of the past two generations to grow much worse, possibly even making human labor obsolete altogether. But if Raval is right, the taxes on capital he has proposed could slow growth and hurt the median worker.

Go deeper

Salesforce rolls the dice on Slack

Illustration: Sarah Grillo/Axios

Salesforce's likely acquisition of workplace messaging service Slack — not yet a done deal but widely anticipated to be announced Tuesday afternoon — represents a big gamble for everyone involved.

For Slack, challenged by competition from Microsoft, the bet is that a deeper-pocketed owner like Salesforce, with wide experience selling into large companies, will help the bottom line.

FBI stats show border cities are among the safest

Data: FBI, Kansas Bureau of Investigation; Note: This table includes the eight largest communities on the U.S.-Mexico border and eight other U.S. cities similar in population size and demographics; Chart: Naema Ahmed/Axios

U.S. communities along the Mexico border are among the safest in America, with some border cities holding crime rates well below the national average, FBI statistics show.

Why it matters: The latest crime data collected by the FBI from 2019 contradicts the narrative by President Trump and others that the U.S.-Mexico border is a "lawless" region suffering from violence and mayhem.

Miriam Kramer, author of Space
2 hours ago - Science

The rise of military space powers

Illustration: Aïda Amer/Axios

Nations around the world are shoring up their defensive and offensive capabilities in space — for today's wars and tomorrow's.

Why it matters: Using space as a warfighting domain opens up new avenues for technologically advanced nations to dominate their enemies. But it can also make those countries more vulnerable to attack in novel ways.