Earlier this week, the World Inequality Database (WID) released some shocking numbers. The average monthly income per capita in Sub-Saharan Africa is 15 times lower than that of North America. In South Asia, per capita income is about one-seventh of what people in North America earn.

But wait. In South Africa, the richest 10% own 65% of the country’s wealth, making it the most unequal economy globally. These figures are true for many countries. In Turkey, the richest 5% own 59.2% of the wealth. The richest 10% own 69.8% of the wealth.

That’s a pretty big difference, isn’t it?

But let’s be honest. You’re probably not too surprised. Capitalism is doing its best.

Many modern economists argue that extreme inequality is an inherent part of a market economy driven by supply and demand, with minimal government intervention. The idea is that wealth gaps naturally arise because talent, hard work, or entrepreneurial skills are not distributed equally across individuals or nations. To some extent, this makes sense. In fact, some warn that trying to reduce inequality in the capitalist system can actually slow down wealth creation and stifle economic growth.

But not everyone believes this explanation.

Take, for example, French economist Thomas Piketty—yes, the man behind the global bestseller Capital in the Twenty-First Century —who has a different perspective.

He argues that inequality in income, wealth, and social status is not the inevitable result of talent or market forces. Instead, he says, it is shaped by deliberate social and political choices. Policies around taxes, social spending, and access to public goods like healthcare and education play a huge role in deciding whether a society becomes more equal or more inegalitarian.

And history backs him up.

Before World War I, Western Europe’s wealth was concentrated in the hands of the elite, and the middle class was almost non-existent. However, the devastation caused by World War I forced governments to rethink their approach. Welfare states emerged, heavy taxes were imposed on the rich, and redistributive policies took over. The result? The middle class now owned about 40% of the wealth in Western Europe. Guess what? These policies did not stifle economic growth, but rather increased stability and prosperity.

Another example is modern-day Sweden. It is often held in the spotlight as a shining example of prosperity and equality – a society where justice and success go hand in hand.

But in the late 19th century, it was one of the most unequal countries in Europe. Only the richest 20% of men could vote, and the richer you were, the more votes you got. This is far from what a beautiful democracy would be like, right? So how did the transformation happen?

Of course, Sweden did not become an egalitarian society by chance. It was the result of a determined working class. They pushed for universal suffrage, progressive taxation, and investment in public education and healthcare. What’s remarkable is that they did all this without resorting to violent revolution.

In fact, Piketty notes that public spending on education in Western Europe has risen from less than 0.5% of national income before World War I to nearly 6% today. This investment has created opportunities for millions and helped build a thriving middle class.

Even the United States followed a similar game plan. Its early focus on education changed the rules of the game. By the 1950s, universal access to secondary education had led to massive industrial productivity. Meanwhile, countries like Germany, France, and Japan lagged behind and took decades to catch up.

But here’s the twist. While education and health care are crucial to reducing inequality, many countries are pulling back on their investments in these areas, leaving citizens to figure out these essential things for themselves. This misstep only increases inequality.

Take Canada, for example. In 1971, education spending peaked at about 7% of national income. By 2022, that figure had fallen to 4%. As a result, students are drowning in debt and losing much of the progress education once made in eliminating inequality.

Education spending in most countries is doubling every six years, and it will become increasingly difficult to allocate more resources to education in the coming years. Healthcare spending is even more alarming, with medical expenses becoming more difficult to budget for each year.

And it’s not just about education and healthcare. Investment in social safety nets is also alarmingly unbalanced. While rich countries spend around 13% of their income on social security, the poorest countries spend only 1.5%. This inequality directly affects people’s quality of life and widens the gap between developing and struggling countries.

Frightening, isn’t it? But more than that, there’s a stark reality. Despite economic growth, some countries remain stuck in a vicious cycle of poverty. The middle-income trap is unchanging, and the dream of moving to a high-income economy seems elusive.

This is where Piketty’s ideas start to make a lot of sense. Prioritizing basic needs and investments in education and healthcare through progressive taxes could be a game-changer in reducing poverty and inequality. He even suggests a fair income ratio where the richest earn no more than 10 times what the poorest earn—a stark contrast to the 1:50 or even 1:100 ratios we see today.

But there’s another aspect of Piketty’s argument that challenges his perspective.

Of course, Piketty argues that wealth often comes from exploitation. But is this true across the board?

Take Taylor Swift, for example. She didn’t inherit her business empire; she built it. She started small — she wrote songs, performed in her youth, and built a loyal fan base. Over time, she built a business empire worth billions of dollars. Her wealth comes from millions of fans who willingly pay for her music, concerts, and products because they see more value in them than they pay for.

Or look at innovators like Eric Yuan, the brain behind Zoom. His success story is about solving a real-world problem, delivering value to millions, and creating wealth in the process.

Simply put, these billionaires didn’t accumulate their wealth through exploitation. They earned it. Nobel Prize winner William Nordhaus found that consumers get 98% of the value from such innovations, and only a small portion of that goes to the creators.

So yes, while Piketty portrays inequality as a deliberate social and political choice, the modern era of innovation tells a different story — one of mutual benefit and economic growth. Taxing wealth may seem like an easy solution, but it begs the question — are we stifling innovation by punishing those who create wealth?