Part III. How Piketty’s Theory Is Incomplete and Wrong in Certain Aspects

 

Here, we discuss how Piketty’s theory if incomplete and wrong in certain aspects:

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1. Limitations of the Data Used in Piketty’s Research

Piketty gathered and analyzed a tremendous amount of data, confirming that the top 1 percent all over the world have increased their share of wealth and income to the greatest extent since the Gilded Age. (Mark Twain used the term Gilded Age to describe the period from the 1870s to about 1900 in his work, The Gilded Age: A Tale of Today.)

Whereas Piketty’s research and analysis of a large amount of data offers a valid insight into the future of capitalism and rising inequality, he might be underestimating real levels of economic inequality because of the nature of the data used in his research. The wealthy in the United States and Europe do not thrive on only earned income; their wealth grows primarily because of capital gains.

In addition, the dynamics of middle-class buying power based on wages can be different from those based on the official data used by Piketty. This is because wage-based buying power depends on the real inflation rate, which is different from the rate of inflation used in economic theories.

For example, in the US, the Consumer Price Index (CPI) is calculated by the US government.  The US Department of Labor states that the CPI is one of the indexes that the government uses to measure inflation: “The CPI measures inflation as experienced by consumers in their day-to-day living expenses.” In other words, according to the government, the CPI measures how inflation increases or reduces wage-based buying power.

In reality, the CPI does not measure the inflation rate because of the way it is calculated by the US government. For the last 30 years, the US government has changed the way it calculates the CPI more than 20 times, altering the list of consumer products in order to lower the CPI. For example, if the price of beef increases, then it is replaced by chicken for the CPI calculation. In this way, the CPI really measures consumer-spending habits, not inflation.

 The US government is motivated to keep the CPI as low as possible because the CPI is connected to automatic cost-of-living increases for millions of Americans, including military and federal civil service retirees, Social Security beneficiaries, etc. The lower the CPI, the less money the government has to spend on these people.

As long as the US government manipulates the CPI, it also misrepresents the rate of inflation. Moreover, the CPI does not measure any decrease in the value of money due to money creation. Obviously, the more money that is created on paper or electronically, the less valuable that money becomes.

If the real inflation rate is higher than the official inflation rate, then middle-class wage-based buying power is decreasing. For example, if the real inflation rate is 10 percent in one year, then a person’s wage-based buying power decreases as long as the increase in the person’s wage is less than 10 percent in the same year.

In the US, middle-class wage-based buying power has been decreasing since approximately 1974. Many women had to go to work, and most Americans went into debt in order to keep their middle class lifestyle afloat. In their book, The Two-Income Trap, Elizabeth Warren and Amelia Warren Tyagi describe how families are driven into debt by slowing income growth, not overspending. The situation becomes even more worrisome if we acknowledge that the continuous decline in wage-based buying power takes place because the real inflation rate exceeds the inflation rate numbers provided by the government’s CPI.

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2. Inadequate Analysis of Forces That Drive Economic Inequality

In his book, Piketty presents the results of his research in the form of mathematical expressions describing the dynamics of the data that he and his colleagues collected. He calls these mathematical expressions “fundamental laws of capitalism.”

The first mathematical expression (“the first law”) tells us that capital’s share equals the rate of return on capital multiplied by the total stock of wealth (as a share of GDP), where the rate of return is presented as the sum of all income flowing to capital as a percentage of the value of capital.

The second mathematical expression (“the second law”) tells us that in the course of long periods and under certain circumstances, the stock of capital, which is presented as a percentage of national income, would approach the ratio of the national savings rate to the economic growth rate. It follows then that a lower growth rate corresponds to higher concentration of wealth. In other words, returns to capital are increasing faster than economies are growing. As a result, the wealthy get wealthier while working people have to struggle.

Although these mathematical expressions are supported by empirical evidence, it would be difficult to refer to them as a scientific theory. This is because the purpose of any scientific theory is to explain empirical data, and Piketty’s mathematical expressions do not explain the driving forces behind modern capitalism and rising inequality.

Michael Hudson, a professor of economics at the University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College, points out that Piketty does not investigate the creation of various types of wealth and that he does not consider legal and political schemes used to create and concentrate wealth in the hands of few. Consequently, Hudson argues that Piketty is mistaken when he treats growing inequality as a natural state, understating the fact that the rise of inequality is driven by certain economic and political trends controlled by the wealthy.

Following Hudson’s argument, we can say that Piketty assumes that wealth somehow creates wealth, and money somehow creates more money. Piketty does not analyze in depth the various tactics used by the top 1 percent to manipulate financial and political systems in order to increase economic inequality. Yet, examples of such manipulation are abundant.

The wealth of the top 1 percent is created by human labor and financial schemes. When the wealth of the top 1 percent is created by the other 99 percent, it is called exploitation or parasitizing. The same can be said about the modern financial system that allows the top 1 percent to keep the other 99 percent in perpetual debt. Yet, Piketty does not discuss these issues. He addresses the inequality by proposing a tax on wealth and keeping the existing debt pyramid.

He also does not consider a historical fact that many large fortunes were originally built using criminal methods. For example, some Wall Street predators make their way into the top 1 percent by running mortgage and other financial schemes. Similarly, the richest people in Russia and the other former USSR republics acquired their wealth in various criminal ways during the so-called “privatization period” that occurred in the 1990s during transition from socialism to capitalism.

In her article, “Privatizatsiya and Kriminalizatsiya How Organized Crime Is Hijacking Privatization,” Svetlana P. Glinkina, a director of the Institute of International Economic and Political Studies at the Center for East European Studies, Russian Academy of Sciences, Moscow, writes,

There is another group of factors that influence the criminal character of privatization [in Russia]. They are closely connected with the very method of privatization that was chosen when the process was launched.…The first stage of the government’s reforms—near universal price liberalization—had already released a storm of inflation and caused industrial output to plummet. Unless private ownership of industry and commerce could be set in place with extraordinary speed, economic collapse might well provoke broad popular resistance before privatization was complete. Now it is clear that the key consideration was not whether privatization was an economic success in the sense of promoting growth and providing jobs; much more central in the government’s strategy was that the process should be “irreversible,” creating a new class of large property owners ready to fight to retain their wealth. As a result, many of the investors who are participating in privatization were created from shadow economic activity—speculation, racketeering, extortion, looting and so on. Thus, Russia’s privatization process is turning many of the country’s prime assets over to swindlers and thieves.

Orchestrated in the 1990s by Yegor Gaidar and Anatoly Chubais, chief economists in Boris Yeltsin’s government, privatization allowed a group of criminals—who then called themselves oligarchs—to rob many millions of people in Russia, pushing them below the poverty line and demonstrating how wealth is really made. It is no wonder that the media controlled worldwide by the top 1 percent praised Mikhail Khodorkovsky, Roman Abramovich and other oligarchs from Russia, who swindled millions of middle-class workers out of their standard of living.

If we look back in the past, we can find similar examples in American and Western European history. For example, the period of American history that followed the Civil War was named by Mark Twain “The Gilded Age” in order to describe how the luxurious lifestyle of a few of the richest, including Carnegie, Mellon, Morgan, Rockefeller and Vanderbilt, was masking the ugliness of the origins of their fortunes. There is a reason why they were called robber barons at that time. They were able to hoard vast fortunes by exploiting workers who lived in poverty and worked long hours at physically difficult and often dangerous jobs.

In his article, “Our Major Depressive Disorder and the New Gilded Age,” Jason T. Eastman, Assistant Professor of Sociology at Coastal Carolina University, writes,

The inequalities beneath the surface of ‘The Gilded Age’ façade resulted in economic and political practices that concentrated not just wealth but also power in the hands of robber barons.  Political corruption was widespread during ‘The Gilded Age,’ which enabled robber barons to both rig economic rules to their favor or avoid culpability for their behaviors that went beyond moral and crossed legal lines.

To support his argument, Eastman recalls the story of the railroad baron Jay Gould who used political connections to create inflation that forced commodity traders to move goods at great rates on Gould’s trains. Eastman points out that Gould’s manipulations triggered the Black Friday stock market crash in 1869.  Yet, Gould was not charged with any crime thanks to his political connections.

Eastman further emphasizes that such practices were very common and that “robber barons drew upon their power and oligopolistic control over the economy to maximize their gains in ways that often came at the expense of less powerful others and the economy as a whole.”

Yet, Piketty does not discuss the criminal origins of many fortunes and considers concentration of wealth in the hands of few as a natural economic process that has nothing to do with crime.

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3. Lack of Distinction between Real Regulated Markets and Theoretical Free Markets

Piketty states that his theory describes free market capitalism. Then, he applies his theory to real economic systems. However, it is highly debatable whether the concept of a free market is applicable to the real market. In a free market economy, prices for goods and services are not regulated, but the modern market is regulated in many ways.

First, the modern market is regulated by monopolies that can set prices to their liking. When a small number of corporations control 40 percent or more of a market, the market loses its competitiveness, and it is not a free market. Barry Lynn, for example, writes in his book, Cornered: The New Monopoly Capitalism and the Economics of Destruction, that today American industry is concentrated in the hands of few as it has not been since before the era of Theodore Roosevelt. Many people in the US are not aware of this trend because modern monopolies carefully disguise their true monopolistic nature.

For example, a few multinational corporations control the food industry in the US and in the whole world.  Five corporations dominate grain trading, and four of them—Cargill, Continental, Bunge and Louis Dreyfus—have been in this business for 100 years. Their food-industry monopoly controls every agricultural segment, from the seeds, fertilizers and agricultural machinery to food processing, food transportation and retailing, affecting millions of small farmers and suppliers.

The monopoly reduces or eliminates any competition so that it can control the pricing system, thus increasing profits. The wealthy who own monopolies further use their economic and political power to influence policymakers in order to remove any barriers that might stand in the way of greater profits. Moreover, monopolies use their power to shape public opinion on various serious issues. For example, in his book, The New Media Monopoly, Ben Bagdikian  argues that the US is close to becoming victim of a complete media monopoly.

Today, the wealthy own a few  corporations that own the majority of all the media in the US, telling Americans what is new, what is right and what is wrong, what is good and what is bad. The media monopoly functions not only against the idea of a free market, but it also negatively impacts any democratic trends because it is the major source of information for the electorate, and it has the ability to hijack and manipulate the public debate.

There is another reason why the modern market is not a free market. Governments directly regulate a significant part of the market. This is particularly true for the military and defense industry, which exists at the expense of the private sector and regular taxpayers in capitalist economies. It is regulated and subsidized by governments.

Thomas Duncan and Christopher Coyne, economists from George Mason University, discuss this question as follows in their paper “The Overlooked Costs of the Permanent War Economy: A Market Process Approach”:

Once the U.S. embarked upon the path of permanent war, starting with World War II, the result was a permanent war economy. The permanent war economy continuously draws resources into the military sector at the expense of the private economy, even in times of peace.…The permanent war economy does not just transfer resources from the private economy, but also distorts and undermines the market process which is ultimately responsible for improvements in standards of living…. As the state of permanent war persists, the private economy becomes increasingly intertwined with the state. The result is a bloated corporate state and a less dynamic private economy.

These concerns were also expressed a few decades earlier. In 1961, US President Dwight Eisenhower warned of the power of the growing military-industrial complex. He said,

[W]e have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations. This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence—economic, political, even spiritual—is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

Duncan and Coyne’s research cannot be easily dismissed considering the scale of government spending on the military and defense industry. For example, in 1986, at the peak of the Cold War, the US government spent 572 billion USD. In 2010, the United States government spent 738.8 billion USD on national defense.

Nevertheless, in the face of these facts, Piketty treats the economies of developed capitalist countries in terms of a free market.

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4. Insufficient Analysis of the Effect of the Great Depression and Two World Wars on Wealth Distribution

Piketty’s incomplete theory does not consider connections between wealth accumulation and the struggle for access to fossil fuels and other natural resources, as well as the use of cheap human labor. If this struggle is an essential part of capitalism, then any wars caused by such a struggle, including two World Wars, are also an essential part of capitalism. Yet, Piketty treats the World Wars as some accidental events that just “happened” to happen, inadvertently and temporarily reversing existing trends in rising inequality.

However, a serious economic theory cannot treat the Great Depression and two World Wars as accidental and stand-alone events. Although these events temporarily reduced economic inequality, the price paid for it turned out to be too high. Millions of working people suffered from extreme hardship during the Great Depression in the 1930s. More than 60 million people were killed during World War II.

The suffering and death of millions of people are not accounted for in the equations of economic theories. As a result, Piketty ends up making contradictory statements like the one that the masses (middle class) were better off after World War II in spite of the fact that about 60 million people were killed in World War II (sounds like the well-being of the 60 million people murdered in the war does not matter).

Moreover, capitalism played its role in making World War II as destructive and murderous as possible when numerous free market enterprises inspired and supported fascism, profiting from the war. Some of the well-known American individuals and corporations involved with the fascist regimes before and during World War II are: John Rockefeller, Andrew Mellon (a banker and Secretary of Treasury), William Hearst, Joseph Kennedy, Allen Dulles, Prescott Bush, DuPont, General Motors, Standard Oil (Exxon), Ford, IBM, ITT, General Electric, National City Bank. Bankers and businessmen from many European countries and Australia also collaborated with the fascist regimes.

Bradford Snell spent two decades examining a history of General Motors. He writes,

General Motors was far more important to the Nazi war machine than Switzerland. Switzerland was just a repository of looted funds. GM was an integral part of the German war effort. The Nazis could have invaded Poland and Russia without Switzerland. They could not have done so without GM.

In his article “Ford and GM Scrutinized for Alleged Nazi Collaboration,” which was published in Washington Post in 1998, Michael Dobbs writes,

When American GIs invaded Europe in June 1944, they did so in jeeps, trucks and tanks manufactured by the Big Three motor companies in one of the largest crash militarization programs ever undertaken. It came as an unpleasant surprise to discover that the enemy was also driving trucks manufactured by Ford and Opel — a 100 percent GM-owned subsidiary — and flying Opel-built warplanes…

When the U.S. Army liberated the Ford plants in Cologne and Berlin, they found destitute foreign workers confined behind barbed wire and company documents extolling the “genius of the Fuehrer,” according to reports filed by soldiers at the scene.

Piketty pays great attention to the post-war re-distribution of wealth, but he does not investigate collaboration between American and Western European for-profit enterprises and fascism. He ignores any wealth re-distribution processes that took place because of such criminal collaboration.

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5. Insufficient Analysis of the Relationship between Wealth and Political Power

Piketty also distances his research from the mechanisms of wealth creation that involve the relations between the wealthy and policymakers. In the 1980s, for example, Charles Keating, a banker and financier, had a group of senators intervene on his behalf with regulators during the savings-and-loan scandal. When a congressional committee asked him whether the 1.5 million dollars that he had “distributed” to a few key elected officials could actually buy him influence, Keating replied, “I certainly hope so.”

Then, in 2010, the US Supreme Court’s 5–4 ruled in the Citizens United case that the restrictions on corporate expenditures in elections contained in the Bipartisan Campaign Reform Act violated the First Amendment protections of free speech. The Supreme Court removed limitations on campaign spending, providing legal protection for corporations to basically buy the government.

Wealth can buy power, which produces more wealth. This means that policymakers are inclined to promote increased inequality as long as they belong to the class of the wealthy and/or the class of the wealthy pays them to represent the interests of the wealthy. This is why it is wrong to limit the study of economic inequality to economic factors only.

As was mentioned earlier in this book, the majority of US senators, the representatives in the House and key executive-branch policymakers belong to the top 1 percent of wealth and net worth in the US. When the top 1 percent acquire political power, it is natural to expect that they will work the system in their interests. As long as this vicious cycle continues, we cannot expect that policymakers will take any significant steps to reduce economic inequality.

According to Piketty, political action is required in order to deal with economic inequality. Yet, Piketty underplays the fact that the rich typically orchestrate political actions in accordance with their self-interest. He further argues that democracy can reclaim its control over capitalism. However, this argument demonstrates the weakness of Piketty’s approach because he proposes the solutions to the problem of rising inequality while relying on highly ideological speculation. Namely, his solutions are based on speculation that democracy can control the negative aspects of capitalism.

Piketty writes, “The discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation,” but his own reasoning indicates that he ignores the results of empirical research conducted by other scholars.

For example, in 2014, Martin Gilens, Professor of Politics at Princeton University, and Benjamin I. Page, Gordon S. Fulcher Professor of Decision Making at Northwestern University, published an article entitled “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens” that reports the results of their empirical research incorporating data for 1,779 policy issues in the US.

Their analysis of the data demonstrates that “economic elites and organized groups representing business interests have substantial independent impacts on US government policy, while average citizens and mass-based interest groups have little or no independent influence.” These empirical findings clearly indicate that solutions proposed by Piketty are not plausible considering that democracy (by its definition) can only exist in countries where average citizens directly influence the official policy of their governments.

Gilens and Page write,

Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association.… But we believe that if policymaking is dominated by powerful business organizations and a small number of affluent Americans, then America’s claims to being a democratic society are seriously threatened.

Every time big businesses and wealthy individuals dominate policymaking, they use their influence to change policies in order to increase the return on their capital. In other words, affluent individuals and for-profit enterprises attempt to transform the governments of their countries into instruments that would create and support a system generating even greater return on capital for the wealthy.

As Warren Buffett once said,

Sure there is class war, and it is my class, the rich, who are making it and we are winning.

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6. Confirmation Bias and Reluctance to Consider Alternative Economic Systems

Piketty relies on a large amount of factual data to study economic inequality in a capitalist economic system. However, he makes judgments about any alternative economic systems without studying them. For example, when it comes to socialism, Piketty discards the scientific method, which requires gathering and analyzing empirical evidence. Moreover, he demonstrates his confirmation bias when he writes,

I . . . came of age listening to news of the collapse of the Communist dictatorships and never felt the slightest affection or nostalgia for . . . the Soviet Union.

Meanwhile, after World War II, for example, the wealthy permitted certain increases in upper-bracket tax rates when they felt threatened by domestic unions and by the Soviet Union.

Social programs that were available in the Soviet Union after World War II surpassed any social programs ever offered in the US and Western Europe. They included, for example, free medical service (whether a person suffered with a cold or needed heart surgery), paid sick days, free child-care system, good-quality free education and guaranteed jobs at graduation from college or university. A person who worked at one place for more than 2-to-5 years received a free condominium (a flat), which he or she could keep as his or her property for the rest of his or her life.

Certainly, no one had a chance to become a millionaire or a billionaire in the Soviet Union, but no one would end up in bankruptcy and on the street because of medical expenses or job loss. What is more, high-school graduates were accepted to the best universities based on their academic performance, not on their parents’ ability to pay for their education.

There is one aspect, though, that makes it difficult to study and measure the success or failure of socialism in the Soviet Union. Here, we are talking about the impact of World War II. The Soviet economy had to deal with severe hardship when German army with its allies brought death to about 27 million people (including more than 10 million civilians) in the Soviet Union, mostly in Russia, and demolished almost half of its cities.

Nevertheless, to a certain degree, the example set by the Soviet Union’s social programs forced the wealthy in the US and Western Europe to allow the existence of some social programs in their own countries in the 20th century. My hypothesis, which proposes the relation between social programs in the Soviet Union and in other countries, is supported by the fact that the social programs in the US and in some countries of Western Europe faced setbacks once the socialistic economy of the USSR was destroyed.

For example, Margaret Thatcher’s policies, especially those introduced in 1985 and later, caused a huge rise in inequality in the UK, widening the income disparity faster than ever before. During that time, inequality expressed in terms of income differences increased by more than 30 percent, and the percentage of children living in poverty more than doubled during the 1980s. This trend has never been reversed since then. Interestingly, this period matches the beginning of destruction of socialism in the Soviet Union.

The top 1 percent of the world want to persuade the other 99 percent that the best and the only possible economic system is the system that allows 1 percent of the world’s population to own more wealth than the other 99 percent. Hence, reviews and opinions on socialism are skewed by politicians and the wealthy who are interested in supporting the existing system that serves the top 1 percent.

One of the arguments they use relies on the idea that socialism has to be dismissed simply because of the problems (including the problems with the political system) that existed in the Soviet Union. However, they do not suggest dismissing capitalism because of the political corruption in the countries that employ capitalism.

Moreover, the Soviet Union is not the only example of a socialistic economic system. Swedish socialism definitely deserves a thorough consideration. Over the last few decades, Sweden has built an economic system committed to economic fairness and has established itself as one of the strongest economies in the world.

Today, Sweden maintains high quality of life and one of the world’s highest GDPs. Certainly, Swedish economic system has its own problems. However, this does not mean that economists should dismiss its experience in socialism only because they do not feel “the slightest affection or nostalgia for . . . the Soviet Union.”

One can understand the motivation of the wealthy who stand against any merit-based economic system. However, it is wrong for a serious scholar to dismiss the positive and negative aspects of alternative economic systems without studying them as thoroughly as he studies the positive and negative aspects of a capitalist economic system.

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7. Real Objectives of Proposed Solutions

Piketty’s research indicates that rising inequality is an essential feature of capitalism, and that it can make the life of working people hard enough to cause mass rebellion. Piketty demonstrates that capitalism does not distribute wealth widely enough and that it produces greater inequality, as well as anti-democratic oligarchies.

Joseph Stiglitz’s conclusions about the rising inequality in the US are aligned with Piketty’s argument. In his article, “Of the 1%, by the 1%, for the 1%,” Stiglitz writes,

In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran.

Stiglitz points out that the US becomes more and more divided into the haves and the have-nots, and the wealthy become more unwilling to spend money on common needs.

Nevertheless, Piketty views capitalism as the only viable economic system. He proposes a solution to the problems of capitalism in the form of progressive taxation and a wealth tax. However, his solution is beneficial only for capitalists and oligarchs because its ultimate goal is to create a “cushion” to mitigate the destructive effects of patrimonial capitalism with its open oligarchy and thereby suppress mass rebellion.

Indeed, his solution looks incomplete to those people who wish to live in a society with greater opportunities for all, where people would have a chance to achieve success based on their education and skills. Yet, his solution looks sufficient for the rich seeking ways to preserve their system.

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Part IV. What is Next: the Future of Economic Inequality

Income inequality in the United States and other countries around the world has been growing since the 1970s. Emmanuel Saez, a professor of UC-Berkeley, conducted research that revealed that:

• in 1982, the highest-earning 1 percent of families in the US received 10.8 percent of all pretax income, and the bottom 90 percent of families in the US received 64.7 percent;
• in 2012, the top 1 percent of families in the US received 22.5 percent of pretax income, and the bottom 90 percent of families in the US received 49.6 percent of all pretax income.

Piketty’s book does great job making the general public aware of the magnitude of this anti-democratic trend.

A new study, which was partially funded by NASA, has studied the possibility of collapse of our industrial civilization within the next few decades. This independent study was centered on a new ‘Human And Nature DYnamical’ (HANDY) model.

The study identified unsustainable consumption of natural resources and growing inequality in wealth distribution as the main causes for possible collapse. It demonstrated that number of important factors, including population, water, agriculture, energy and climate, have caused collapse of various civilizations that existed in the history of humankind, and they can cause collapse of our modern civilization when they produce the following conditions:

1. “the stretching of resources due to the strain placed on the ecological carrying capacity”; and
2. “the economic stratification of society into Elites [rich] and Masses (or “Commoners”) [poor].”

These conditions have played a crucial role in the collapse of civilizations on our planet for the last five thousand years. Today, they come together with additional factors such as financial  schemes run by banks for their private gain, as well as endless wars. Will our modern civilization be able avoid a collapse?

It might be difficult to answer this question, considering that growing economic inequalities and division into rich and poor are accompanied by the upsurge of overconsumption of natural resources, and that it is considered a norm that the wealth produced by the masses becomes the property of a small group of the wealthy.

John Beddington, the UK government’s chief scientific adviser, also warns us about a possible global crisis that might happen in 2030. The research conducted by Beddington and his colleagues predicts that by 2030, humankind will face a number of serious issues: the world’s population will grow by 33 percent; demand for food will rise by 50 percent; demand for water will grow by 30 percent; and demand for energy will increase by 50 percent. Beddington points out that the shortage of food, water and energy can result in a “perfect storm,” leading to political, economic and social collapse.

Another event might contribute to the “perfect storm,” resulting in an unexpected outcome. Here, we are talking about the technological singularity, the event in which artificial intelligence will exceed human intelligence.

One of the first encounters of the general public with artificial intelligence took place in February 2011, when Watson, a super-computer designed by IBM, defeated two highly-experienced players in the game of Jeopardy. IBM officially describes Watson as a cognitive computing system. Today, Watson is almost 3 times faster than it was in 2011 and about 15 times smaller.

Watson might be considered as a an example of the first generation of artificial intelligence because it can read and understand natural language, generate and evaluate hypotheses based on data provided. It can also learn from its interactions with humans and from any sources of information it can access.

Today, research in artificial intelligence advances at increasing pace, and artificial intelligence machines learn how to collect and analyze information, how to adjust their behavior in accordance with knowledge gained from their previous experience.

For example, Hod Lipson, a professor of engineering from Cornell University, reports that he has designed robots that can learn and self-replicate. His robots are capable of using feedback from their limbs in order to learn how to walk. After monitoring swinging pendulums for one day, one of Lipson’s robots even used its own algorithm to derive Newton’s second law of motion.

Interestingly, Ray Kurzweil, Google’s director of engineering, predicts that artificial intelligence machines capable of understanding complex natural language will be built by the year 2029. According to Kurzweil, artificial intelligence machines will have emotional intelligence and, most importantly, they will be able to do almost all the complex things that humans can do.

The year 2029 is very close to the year of the perfect storm predicted by Beddington. What will happen if the moment of the singularity arrives almost simultaneously with the perfect storm predicted by Beddington? What will happen if this event is amplified by the growing economic inequality forecasted by Piketty?

The shortage of food, water and energy can make societies extremely unstable. When artificial intelligence machines learn how to do the same work that humans do in the system that serves the wealthy, they can replace human workers, making millions or even billions of humans irrelevant (extraneous) to such system.

The combination of these conditions might trigger the Great Perfect Storm that will change the essence of our civilization.

Can the Great Perfect Storm really happen? We will find out sooner or later. After all, Niels Bohr said that predictions are difficult to make, especially about the future.

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