Capital in the Twenty-First Century

Title: Capital in the Twenty-First Century

Author: Thomas Piketty

Overview: Dense and still working my way through it. Once I got through the first section, it got more engaging. Not a perspective I usually use to examine the world.


  • if capital ownership were equally distributed and each worker received an equal share of profits in addition to his or her wages, virtually no one would be interested in the division of earnings between profits and wages. If the capital-labor split gives rise to so many conflicts, it is due first and foremost to the extreme concentration of the ownership of capital. Inequality of wealth—and of the consequent income from capital—is in fact always much greater than inequality of income from labor.
  • capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market. Capital includes all forms of real property (including residential real estate) as well as financial and professional capital (plants, infrastructure, machinery, patents, and so on) used by firms and government agencies.
  • One characteristic of the financial globalization that has taken place since the 1980s is that many countries have more or less balanced net asset positions, but those positions are quite large in absolute terms. In other words, many countries have large capital stakes in other countries, but those other countries also have stakes in the country in question, and the two positions are more or less equal, so that net foreign capital is close to zero.
  • From 1900 to 1980, 70–80 percent of the global production of goods and services was concentrated in Europe and America, which incontestably dominated the rest of the world. By 2010, the European–American share had declined to roughly 50 percent, or approximately the same level as in 1860. In all probability, it will continue to fall and may go as low as 20–30 percent at some point in the twenty-first century. This was the level maintained up to the turn of the nineteenth century and would be consistent with the European–American share of the world’s population
  • the most recent available survey shows that while some European prices (for energy, housing, hotels, and restaurants) are indeed higher than comparable American prices, others are sharply lower (for health and education, for instance).27 In theory, the official estimates weight all prices according to the weight of various goods and services in a typical budget for each country, but such calculations clearly leave a good deal of room for error, particularly since it is very hard to measure qualitative differences for many services.
  • Overall, the European powers in 1913 owned an estimated one-third to one-half of the domestic capital of Asia and Africa and more than three-quarters of their industrial capital.
  • it is commonly assumed that real growth doesn’t begin until one has achieved 3–4 percent a year or even more, as Europe did in the thirty years after World War II and as China is doing today. In fact, however, growth on the order of 1 percent a year in both population and per capita output, if continued over a very long period of time, as was the case after 1700, is extremely rapid, especially when compared with the virtually zero growth rate that we observe in the centuries prior to the Industrial Revolution. Indeed, according to Maddison’s calculations, both demographic and economic growth rates between year 0 and 1700 were below 0.1 percent (more precisely, 0.06 percent for population growth and 0.02 percent for per capita output).
  • According to official forecasts, progress toward the demographic transition at the global level should now accelerate, leading to eventual stabilization of the planet’s population. According to a UN forecast, the demographic growth rate should fall to 0.4 percent by the 2030s and settle around 0.1 percent in the 2070s. If this forecast is correct, the world will return to the very low-growth regime of the years before 1700. The global demographic growth rate would then have followed a gigantic bell curve in the period 1700–2100, with a spectacular peak of close to 2 percent in the period 1950–1990
  • the same thought expressed today in the idea that the new information economy will allow the most talented individuals to increase their productivity many times over. The plain fact is that this argument is often used to justify extreme inequalities and to defend the privileges of the winners without much consideration for the losers, much less for the facts, and without any real effort to verify whether this very convenient principle can actually explain the changes we observe.
  • it is important to recall that past growth, as spectacular as it was, almost always occurred at relatively slow annual rates, generally no more than 1–1.5 percent per year. The only historical examples of noticeably more rapid growth—3–4 percent or more—occurred in countries that were experiencing accelerated catch-up with other countries. This is a process that by definition ends when catch-up is achieved and therefore can only be transitional and time limited. Clearly, moreover, such a catch-up process cannot take place globally.
  • the first crucial fact to bear in mind is that inflation is largely a twentieth-century phenomenon. Before that, up to World War I, inflation was zero or close to it. Prices sometimes rose or fell sharply for a period of several years or even decades, but these price movements generally balanced out in the end. This was the case in all countries for which we possess long-run price series.
  • By the middle of the twentieth century, capital had largely disappeared. A little more than half a century later, it seems about to return to levels equal to those observed in the eighteenth and nineteenth centuries. Wealth is once again flourishing. Broadly speaking, it was the wars of the twentieth century that wiped away the past to create the illusion that capitalism had been structurally transformed.