Paper Title
Understanding Piketty through Marx - How is Rising Inequality Related to Economic Crisis?

Abstract
This work makes a theoretical connection between different notions of Marxist crisis theories under capitalism (under consumption theory, profit squeeze theory, and the theory of the tendency of the rate of profit to fall) and its relation to inequality. A number of studies have documented that inequality of income and wealth is rising in France (Piketty (2001)), in the UK (Atkinson (2002)), in the US (Piketty and Saez (2003)), and in Europe and the developed world (Atkinson and Piketty (2007)). Piketty’s monumental empirical study, Capital in the Twenty First Century, documents in meticulous detail the concentration of wealth and income at the top, where the distribution becomes more skewed as we move to the very top (top 10% to 1% to 0.1%). The results indicate a return to the ‘Gilded Age’ because of, what Piketty calls, ‘patrimonial capitalism’. Piketty and Chancel (2017) finds similar evidence of rising inequality in India, which is highest since the middle of the 1920s. A consistent feature noticed across countries is that the inequality, both of income and wealth, increases sharply after the onset of neoliberal policies (after late ’70s and early ’80s in UK and US, after late ’80s early ’90s in India). Neoclassical theories of business cycle analysis has often asked the following question: how does an economic downturn affect inequality? While most studies find a countercyclical relationship with inequality and recession (top income shares Mendershausen (1946), Kuznets (1953); inequality in the US and UK Dimelis and Livada (1999), Maliar, Maliar and Mora (2005), Atkinson and Morelli (2011)) some have shown that top income shares have fallen because of recession (Saez (2013)). However, the neoclassical theories of real business cycle do not posit a theoretical relationship between inequality and economic downturn. Crisis theories of Marxist political economy often relate inequality as a necessary accompaniment of capitalist social relations. My analysis tries to connect inequality and it’s functional relationship to crisis tendencies. I content that a rising inequality is a causal mechanism for bringing about capitalist crisis in underconsumption theory (Magdoff and Foster (2009)), on the contrary a rise in inequality functions as a stabilizing influence on capitalist social relation from the point of view of a profit squeeze theory. From the point of view of the theory of the tendency of the rate of profit to fall, inequality is neither a functional requirement nor indeed an immediate necessary outcome of a crisis tendency—though the existence of greater inequality does exacerbate the tendencies towards the generation of an economic crisis. Keywords - Inequality; Crisis theories; Comparative Political Economy