Capital in the Twenty-First Century by Thomas Piketty

Author:Thomas Piketty [Piketty, Thomas]
Language: eng
Format: epub, mobi, azw3
Publisher: The Belknap Press of Harvard University Press

Some Partial Explanations: Time, Taxes, and Growth

In the end, then, it is hardly surprising that the concentration of wealth decreased sharply everywhere between 1910 and 1950. In other words, the descending portion of Figures 10.1–5 is not the most difficult part to explain. The more surprising part at first glance, and in a way the more interesting part, is that the concentration of wealth never recovered from the shocks I have been discussing.

To be sure, it is important to recognize that capital accumulation is a long-term process extending over several generations. The concentration of wealth in Europe during the Belle Époque was the result of a cumulative process over many decades or even centuries. It was not until 2000–2010 that total private wealth (in both real estate and financial assets), expressed in years of national income, regained roughly the level it had attained on the eve of World War I. This restoration of the capital/income ratio in the rich countries is in all probability a process that is still ongoing.

It is not very realistic to think that the violent shocks of 1914–1945 could have been erased in ten or twenty years, thereby restoring by 1950–1960 a concentration of wealth equal to that seen in 1900–1910. Note, too, that inequality of wealth began to rise again in 1970–1980. It is therefore possible that a catch-up process is still under way today, a process even slower than the revival of the capital/income ratio, and that the concentration of wealth will soon return to past heights.

In other words, the reason why wealth today is not as unequally distributed as in the past is simply that not enough time has passed since 1945. This is no doubt part of the explanation, but by itself it is not enough. When we look at the top decile’s share of wealth and even more at the top centile’s (which was 60–70 percent across Europe in 1910 and only 20–30 percent in 2010), it seems clear that the shocks of 1914–1945 caused a structural change that is preventing wealth from becoming quite as concentrated as it was previously. The point is not simply quantitative—far from it. In the next chapter, we will see that when we look again at the question raised by Vautrin’s lecture on the different standards of living that can be attained by inheritance and labor, the difference between a 60–70 percent share for the top centile and a 20–30 percent share is relatively simple. In the first case, the top centile of the income hierarchy is very clearly dominated by top capital incomes: this is the society of rentiers familiar to nineteenth-century novelists. In the second case, top earned incomes (for a given distribution) roughly balance top capital incomes (we are now in a society of managers, or at any rate a more balanced society). Similarly, the emergence of a “patrimonial middle class” owning between a quarter and a third of national wealth rather than a tenth or a twentieth (scarcely more than the poorest half of society) represents a major social transformation.

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