Capital in the Twenty First Century

This book was unfairly criticised when it first came out – don’t let rumours regarding the data being

unreliable stop you reading this book. It truly is the best attempt made to date to measure what has been happening in society over the past two hundred years.

The book focuses on societies where data is readily available, mainly through the tax records, but then augments this with data drawn from whatever sources are available such as descriptions in literature. Indeed the author recognises that the data may not be perfect but within the bounds of its accuracy a number of conclusions can be drawn.

The main one is that in the UK and Europe the concentration of wealth peaked just before the first world war. The two world wars had the effect of destroying capital and thereby causing a more egalitarian society. In the aftermath of the second world war the generation of baby boomers – of which I am one – lived through an era where it was felt that our socio-economic system was becoming more just. This view being supported by the revised dispersion of wealth at the time. However this period turns out to be an anomaly. We are nearly back to the wealth concentrations of the early 20th Century and on track to surpassing them.

To give concrete examples in 1910 in Europe the top 10% of the population owned 90% of capital and received 50% of the total income (from labour & capital). The bottom 50% of the population owned 5% of the capital and received 15% of total income. In other words the top 10% in society owned 100 times more capital than the average of the bottom 50% and had an income 50 times greater than the average of the bottom 50%.

Things became less polarised during and just after the two world wars but the US is back to the 1910 level of inequality in terms of income today (50% to the top 10%) and Europe is not far behind. In terms of capital distribution we are not quite back to the levels of the aristocratic era but nearly there.

The book raises the question of whether this is a sustainable position, and/or trend, in a world where disparity is much more visible given social media. The author looks at potential remedies – the attractiveness of these will depend on your political persuasion. That said anyone of my generation will have their world view shattered by the facts – the 70s and 80s were an anomaly and wrongly formed the perceptions of the post war generation.

The book is beautifully translated from the French (Piketty is the founder of the French version of the LSE) and hence a pleasure to read.