Capital in the Twenty-First Century

Chapters three and four look at how both the nature and size of capital, relative to national income, has evolved since the 18th century. In Britain and France, the capital/income ratio was about seven to one from 1700 to 1914. Then from 1914 to 1950 it fell to around three to one. These changes were in part due to the destruction of capital stock caused by the two world wars. The composition of the capital stock also underwent radical changes. Agricultural land “has gradually been replaced by buildings, business capital, and financial capital invested in firms and government organisations” (147).

Further, the UK and France drastically increased their share of foreign assets between 1700 and 1914. At the height of their empires these nations owned assets equivalent to two years of national income. However, the shocks of two world wars, decolonization, and the Great Depression, destroyed most of the French and British foreign capital assets. This meant that from 1950 to 2010 their net foreign assets (foreign assets minus the assets the rest of the world owned in their countries) was roughly zero. Turning to the split between public and private capital, Piketty highlights that in the UK and France private wealth accounted for almost all wealth in 2010.