largely responsible for the vertiginous increase in the top centile’s share of wealth in Britain and France during the Belle Époque.

[...] In the United States in recent years, one frequently has heard this type of justification for the stratospheric pay of supermanagers (50– 100 times average income, if not more). Proponents of such high pay argued that without it, only the heirs of large fortunes would be able to achieve true wealth, which would be unfair. In the end, therefore, the millions or tens of millions of dollars a year paid to supermanagers contribute to greater social justice. This kind of argument could well lay the groundwork for greater and more violent inequality in the future. The world to come may well combine the worst of two past worlds: both very large inequality of inherited wealth and very high wage inequalities justified in terms of merit and productivity (claims with very little factual basis, as noted).
Meritocratic extremism can thus lead to a race between supermanagers and
rentiers, to the detriment of those who are neither.

The problem posed by this use of the word “rent” is very simple: the fact
that capital yields income, which in accordance with the original meaning of
the word we refer to in this book as “annual rent produced by capital,” has
absolutely nothing to do with the problem of imperfect competition or monopoly. If capital plays a useful role in the process of production, it is natural
that it should be paid. When growth is slow, it is almost inevitable that this
return on capital is significantly higher than the growth rate, which automatically bestows outsized importance on inequalities of wealth accumulated
in the past. This logical contradiction cannot be resolved by a dose of additional competition. Rent is not an imperfection in the market: it is rather the
consequence of a “pure and perfect” market for capital, as economists understand it: a capital market in which each owner of capital, including the least
capable of heirs, can obtain the highest possible yield on the most diversified
portfolio that can be assembled in the national or global economy. To be sure,
there is something astonishing about the notion that capital yields rent, or
income that the owner of capital obtains without working. Th ere is some-
thing in this notion that is an affront to common sense and that has in fact
perturbed any number of civilizations, which have responded in various ways, not always benign, ranging from the prohibition of usury to Sovie-style com-
munism. Nevertheless, rent is a reality in any market economy where capital is
privately owned. The fact that landed capital became industrial and financial
capital and real estate left this deeper reality unchanged. Some people think
that the logic of economic development has been to undermine the distinction
between labor and capital. In fact, it is just the opposite: the growing sophisti-
cation of capital markets and financial intermediation tends to separate owners
from managers more and more and thus to sharpen the distinction between pure
capital income and labor income. Economic and technological rationality at
times has nothing to do with democratic rationality. The former stems from
the Enlightenment, and people have all too commonly assumed that the latter
would somehow naturally derive from it, as if by magic. But real democracy
and social justice require specific institutions of their own, not just those of
the market, and not just parliaments and other formal democratic institutions.