Capital in the Twenty-First Century
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Authors: Thomas Piketty
Capital in the Twenty-First Century
CAPITAL IN THE
TWENTY-FIRST
CENTURY
Thomas Piketty
Translated by Arthur Goldhammer
The Belknap Press of Harvard University Press
CAMBRIDGE, MASSACHUSETTS LONDON, ENGLAND
2014
Copyright © 2014 by the President and Fellows of Harvard College
All rights reserved
First published as
Le capital au XXI siècle,
copyright © 2013 Éditions du Seuil
Design by Dean Bornstein
Jacket design by Graciela Galup
The Library of Congress has cataloged the printed edition as follows
Piketty, Thomas, 1971–
[Capital au XXIe siècle. English]
Capital in the twenty-first century / Thomas Piketty ; translated by Arthur Goldhammer.
pages cm
Translation of the author’s Le capital au XXIe siècle.
Includes bibliographical references and index.
ISBN
978-0-674-43000-6 (alk. paper)
1. Capital. 2. Income distribution. 3. Wealth. 4. Labor economics. I.
Goldhammer, Arthur, translator. II. Title.
HB501.P43613 2014
332'.041—dc23
2013036024
Contents
Part One:
Income and Capital
2.
Growth: Illusions and Realities
Part Two:
The Dynamics of the Capital/Income Ratio
3.
The Metamorphoses of Capital
4.
From Old Europe to the New World
5.
The Capital/Income Ratio over the Long Run
6.
The Capital-Labor Split in the Twenty-First Century
Part Three:
The Structure of Inequality
7.
Inequality and Concentration: Preliminary Bearings
10.
Inequality of Capital Ownership
11.
Merit and Inheritance in the Long Run
12.
Global Inequality of Wealth in the Twenty-First Century
Part Four:
Regulating Capital in the Twenty-First Century
13.
A Social State for the Twenty-First Century
14.
Rethinking the Progressive Income Tax
16.
The Question of the Public Debt
List of Tables and Illustrations
This book is based on fifteen years of research (1998–2013) devoted essentially to
understanding the historical dynamics of wealth and income. Much of this research
was done in collaboration with other scholars.
My earlier work on high-income earners in France,
Les hauts revenus en France au 20e siècle
(2001), had the extremely good fortune to win the enthusiastic support of Anthony
Atkinson and Emmanuel Saez. Without them, my modest Francocentric project would surely
never have achieved the international scope it has today. Tony, who was a model for
me during my graduate school days, was the first reader of my historical work on inequality
in France and immediately took up the British case as well as a number of other countries.
Together, we edited two thick volumes that came out in 2007 and 2010, covering twenty
countries in all and constituting the most extensive database available in regard
to the historical evolution of income inequality. Emmanuel and I dealt with the US
case. We discovered the vertiginous growth of income of the top 1 percent since the
1970s and 1980s, and our work enjoyed a certain influence in US political debate.
We also worked together on a number of theoretical papers dealing with the optimal
taxation of capital and income. This book owes a great deal to these collaborative
efforts.
The book was also deeply influenced by my historical work with Gilles Postel-Vinay
and Jean-Laurent Rosenthal on Parisian estate records from the French Revolution to
the present. This work helped me to understand in a more intimate and vivid way the
significance of wealth and capital and the problems associated with measuring them.
Above all, Gilles and Jean-Laurent taught me to appreciate the many similarities,
as well as differences, between the structure of property around 1900–1910 and the
structure of property now.
All of this work is deeply indebted to the doctoral students and young scholars with
whom I have been privileged to work over the past fifteen years. Beyond their direct
contribution to the research on which this book draws, their enthusiasm and energy
fueled the climate of intellectual excitement in which the work matured. I am thinking
in particular of Facundo Alvaredo, Laurent Bach, Antoine Bozio, Clément Carbonnier,
Fabien Dell, Gabrielle Fack, Nicolas Frémeaux, Lucie Gadenne, Julien Grenet, Elise
Huilery, Camille Landais, Ioana Marinescu, Elodie Morival, Nancy Qian, Dorothée Rouzet,
Stefanie Stantcheva, Juliana Londono Velez, Guillaume Saint-Jacques, Christoph Schinke,
Aurélie Sotura, Mathieu Valdenaire, and Gabriel Zucman. More specifically, without
the efficiency, rigor, and talents of Facundo Alvaredo, the World Top Incomes Database,
to which I frequently refer in these pages, would not exist. Without the enthusiasm
and insistence of Camille Landais, our collaborative project on “the fiscal revolution”
would never have been written. Without the careful attention to detail and impressive
capacity for work of Gabriel Zucman, I would never have completed the work on the
historical evolution of the capital/income ratio in wealthy countries, which plays
a key role in this book.
I also want to thank the institutions that made this project possible, starting with
the École des Hautes Études en Sciences Sociales, where I have served on the faculty
since 2000, as well as the École Normale Supérieure and all the other institutions
that contributed to the creation of the Paris School of Economics, where I have been
a professor since it was founded, and of which I served as founding director from
2005 to 2007. By agreeing to join forces and become minority partners in a project
that transcended the sum of their private interests, these institutions helped to
create a modest public good, which I hope will continue to contribute to the development
of a multipolar political economy in the twenty-first century.
Finally, thanks to Juliette, Déborah, and Hélène, my three precious daughters, for
all the love and strength they give me. And thanks to Julia, who shares my life and
is also my best reader. Her influence and support at every stage in the writing of
this book have been essential. Without them, I would not have had the energy to see
this project through to completion.
“Social distinctions can be based only on common utility.”
—Declaration of the Rights of Man and the Citizen, article 1, 1789
The distribution of wealth is one of today’s most widely discussed and controversial
issues. But what do we really know about its evolution over the long term? Do the
dynamics of private capital accumulation inevitably lead to the concentration of wealth
in ever fewer hands, as Karl Marx believed in the nineteenth century? Or do the balancing
forces of growth, competition, and technological progress lead in later stages of
development to reduced inequality and greater harmony among the classes, as Simon
Kuznets thought in the twentieth century? What do we really know about how wealth
and income have evolved since the eighteenth century, and what lessons can we derive
from that knowledge for the century now under way?
These are the questions I attempt to answer in this book. Let me say at once that
the answers contained herein are imperfect and incomplete. But they are based on much
more extensive historical and comparative data than were available to previous researchers,
data covering three centuries and more than twenty countries, as well as on a new
theoretical framework that affords a deeper understanding of the underlying mechanisms.
Modern economic growth and the diffusion of knowledge have made it possible to avoid
the Marxist apocalypse but have not modified the deep structures of capital and inequality—or
in any case not as much as one might have imagined in the optimistic decades following
World War II. When the rate of return on capital exceeds the rate of growth of output
and income, as it did in the nineteenth century and seems quite likely to do again
in the twenty-first, capitalism automatically generates arbitrary and unsustainable
inequalities that radically undermine the meritocratic values on which democratic
societies are based. There are nevertheless ways democracy can regain control over
capitalism and ensure that the general interest takes precedence over private interests,
while preserving economic openness and avoiding protectionist and nationalist reactions.
The policy recommendations I propose later in the book tend in this direction. They
are based on lessons derived from historical experience, of which what follows is
essentially a narrative.
Intellectual and political debate about the distribution of wealth has long been based
on an abundance of prejudice and a paucity of fact.
To be sure, it would be a mistake to underestimate the importance of the intuitive
knowledge that everyone acquires about contemporary wealth and income levels, even
in the absence of any theoretical framework or statistical analysis. Film and literature,
nineteenth-century novels especially, are full of detailed information about the relative
wealth and living standards of different social groups, and especially about the deep
structure of inequality, the way it is justified, and its impact on individual lives.
Indeed, the novels of Jane Austen and Honoré de Balzac paint striking portraits of
the distribution of wealth in Britain and France between 1790 and 1830. Both novelists
were intimately acquainted with the hierarchy of wealth in their respective societies.
They grasped the hidden contours of wealth and its inevitable implications for the
lives of men and women, including their marital strategies and personal hopes and
disappointments. These and other novelists depicted the effects of inequality with
a verisimilitude and evocative power that no statistical or theoretical analysis can
match.
Indeed, the distribution of wealth is too important an issue to be left to economists,
sociologists, historians, and philosophers. It is of interest to everyone, and that
is a good thing. The concrete, physical reality of inequality is visible to the naked
eye and naturally inspires sharp but contradictory political judgments. Peasant and
noble, worker and factory owner, waiter and banker: each has his or her own unique
vantage point and sees important aspects of how other people live and what relations
of power and domination exist between social groups, and these observations shape
each person’s judgment of what is and is not just. Hence there will always be a fundamentally
subjective and psychological dimension to inequality, which inevitably gives rise
to political conflict that no purportedly scientific analysis can alleviate. Democracy
will never be supplanted by a republic of experts—and that is a very good thing.