M2 Concentration-diffusion cycles

Topic

Concentration-diffusion cycles represent the two possible states toward which the distribution of resources can shift—increasing concentration or diffusion—depending on the balance between the return on capital and economic growth. As long as the return on capital and economic growth remain aligned, the distribution of resources does not clearly shift toward either cycle.

The relationship between the return on capital and economic growth—the very structural driver described earlier—is the variable that triggers the transition from one concentration-diffusion cycle to the other: when the return on capital consistently outpaces economic growth, this dynamic pushes the cycle toward increasing concentration.

This is the exact same driver captured by the indicator measuring the relationship between the return on capital and economic growth; it is also the force that drives the income and wealth shares of the top percentile upward, eventually fueling extreme concentration. Consequently, tracking which concentration-diffusion cycle a society is in—and specifically whether the return on capital continues to exceed economic growth—allows us to anticipate the trajectory of resource distribution within the realm of inequality, a central theme inextricably linked to the "kinship intensity" track.

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