Capital In The Twenty First Century Quotes

Over a long period of time, the main force in favor of greater equality has been the diffusion of knowledge and skills.

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.

Soviet-style communism failed, not because it was intrinsically evil, but because it was flawed. It allowed too few people to usurp too much power. Twenty-first century market capitalism, American-style, will fail for the same reasons. Both are edifices constructed by human intelligence, undone by human nature.

Communism was a great system for making people equally poor - in fact, there was no better system in the world for that than communism. Capitalism made people unequally rich.

At the heart of every major political upheaval lies a fiscal revolution.

The history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms.

For millions of people, “wealth” amounts to little more than a few weeks’ wages in a checking account or low-interest savings account, a car, and a few pieces of furniture. The inescapable reality is this: wealth is so concentrated that a large segment of society is virtually unaware of its existence, so that some people imagine that it belongs to surreal or mysterious entities. That is why it is so essential to study capital and its distribution in a methodical, systematic way.

Democracy will never be supplanted by a republic of experts—and that is a very good thing.

What was the good of industrial development, what was the good of all the technological innovations, toil, and population movements if, after half a century of industrial growth, the condition of the masses was still just as miserable as before, and all lawmakers could do was prohibit factory labor by children under the age of eight?

As long as the incomes of the various classes of contemporary society remain beyond the reach of scientific inquiry, there can be no hope of producing a useful economic and social history.

When you study history and look at every civilization that has grown up and died off, they all leave one remnant: a major sports colosseum at the heart of their capital. Our fate can be different; but only if we start doing things differently.

Refusing to deal with numbers rarely serves the interests of the least well-off.

United States... on the one hand this is a country of egalitarian promise, a land of opportunity for millions of immigrants of modest background; on the other hand it is a land of extremely brutal inequality, especially in relation to race.

When it comes to decreasing inequalities of wealth for good or reducing unusually high levels of public debt, a progressive tax on capital is generally a better tool than inflation.

The right solution is a progressive annual tax on capital. This will make it possible to avoid an endless inegalitarian spiral while preserving competition and incentives for new instances of primitive accumulation.

Indeed, the distribution of wealth is too important an issue to be left to economists, sociologists, historians, and philosophers.

Social distinctions can be based only on common utility.” —Declaration of the Rights of Man and the Citizen, article 1, 1789

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.

The sharp reduction in income inequality that we observe in almost all the rich countries between 1914 and 1945 was due above all to the world wars and the violent economic and political shocks they entailed (especially for people with large fortunes). It had little to do with the tranquil process of intersectoral mobility described by Kuznets.

In all human societies, health and education have an intrinsic value: the ability to enjoy years of good health, like the ability to acquire knowledge and culture, is one of the fundamental purposes of civilization.

The second conclusion, which is the heart of the book, is that the dynamics of wealth distribution reveal powerful mechanisms pushing alternately toward convergence and divergence. Furthermore, there is no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently.

All signs are that the Scandinavian countries, where wage inequality is more moderate than elsewhere, owe this result in large part to the fact that their educational system is relatively egalitarian and inclusive.

In Europe today, the capital/income ratio has already risen to around five to six years of national income, scarcely less than the level observed in the eighteenth and nineteenth centuries and up to the eve of World War I.

One of the curious aspects of the Twenty-First Century was the great delusion amongst many people, particularly in the San Francisco Bay Area, that freedom of speech and freedom of expression were best exercised on technological platforms owned by corporations dedicated to making as much money as possible.

Among the members of these upper income groups are US academic economists, many of whom believe that the economy of the United States is working fairly well and, in particular, that it rewards talent and merit accurately and precisely. This is a very comprehensible human reaction.

A capital tax is the most appropriate response to the inequality r > g as well as to the inequality of returns to capital as a function of the size of the initial stake.

this fear of growing to resemble Europe was part of the reason why the United States in 1910–1920 pioneered a very progressive estate tax on large fortunes, which were deemed to be incompatible with US values, as well as a progressive income tax on incomes thought to be excessive. Perceptions of inequality, redistribution, and national identity changed a great deal over the course of the twentieth century, to put it mildly.

the decrease in the top marginal income tax rate led to an explosion of very high incomes, which then increased the political influence of the beneficiaries of the change in the tax laws, who had an interest in keeping top tax rates low or even decreasing them further and who could use their windfall to finance political parties, pressure groups, and think tanks.

In contrast to what many people in Britain and the United States believe, the true figures on growth (as best one can judge from official national accounts data) show that Britain and the United States have not grown any more rapidly since 1980 than Germany, France, Japan, Denmark, or Sweden. In other words, the reduction of top marginal income tax rates and the rise of top incomes do not seem to have stimulated productivity (contrary to the predictions of supply-side theory) or at any rate did not stimulate productivity enough to be statistically detectable at the macro level.

Social scientific research is and always will be tentative and imperfect. It does not claim to transform economics, sociology, and history into exact sciences. But by patiently searching for facts and patterns and calmly analyzing the economic, social, and political mechanisms that might explain them, it can inform democratic debate and focus attention on the right questions. It can help to redefine the terms of debate, unmask certain preconceived or fraudulent notions, and subject all positions to constant critical scrutiny. In my view, this is the role that intellectuals, including social scientists, should play, as citizens like any other but with the good fortune to have more time than others to devote themselves to study (and even to be paid for it—a signal privilege).

The general evolution is clear: bubbles aside, what we are witnessing is a strong comeback of private capital in the rich countries since 1970, or, to put it another way, the emergence of a new patrimonial capitalism.

Contrary to a tenacious myth, France is not owned by California pension funds or the Bank of China, any more than the United States belongs to Japanese and German investors. The fear of getting into such a predicament is so strong today that fantasy often outstrips reality. The reality is that inequality with respect to capital is a far greater domestic issue than it is an international one.

if we consider the total growth of the US economy in the thirty years prior to the crisis, that is, from 1977 to 2007, we find that the richest 10 percent appropriated three-quarters of the growth. The richest 1 percent alone absorbed nearly 60 percent of the total increase of US national income in this period. Hence for the bottom 90 percent, the rate of income growth was less than 0.5 percent per year.

Economic growth is quite simply incapable of satisfying this democratic and meritocratic hope, which must create specific institutions for the purpose and not rely solely on market forces or technological progress.

the upper classes instinctively abandoned idleness and invented meritocracy lest universal suffrage deprive them of everything they owned.

To rank economic activities as more or less preferable is ideology, not science: a judgment that is driven by values and predilections, not by hard data.

All told, over the period 1932-1980, nearly half a century, the top federal income tax rate in the United States averaged 81 percent.

They (economists) must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.

Is it really too much, in the twenty-first century, in the wealthiest country on earth, to begin creating an economy in which people actually have some power over what they do for forty hours or more a week?

When a country goes from a population of 3 million to a population of 300 million (to say nothing of the radical increase in territory owing to westward expansion in the nineteenth century), it is clearly no longer the same country.

There is also the idea, widespread among economists, that modern economic growth depends largely on the rise of “human capital.” At first glance, this would seem to imply that labor should claim a growing share of national income. And one does indeed find that there may be a tendency for labor’s share to increase over the very long run, but the gains are relatively modest:

the increase in very high incomes and very high salaries primarily reflects the advent of “supermanagers,” that is, top executives of large firms who have managed to obtain extremely high, historically unprecedented compensation packages for their labor.

There was no gradual, consensual, conflict-free evolution toward greater equality. In the twentieth century it was war, and not harmonious democratic or economic rationality, that erased the past and enabled society to begin anew with a clean slate. What

As Selma James, Mariarosa Dalla Costa, and Silvia Federici pointed out in the 1970s, and Nancy Fraser has argued since, the family as a site of feminine care serves capitalism by giving men emotional and sexual compensation for the coercion of market relations.

In the First World War we lost in all about three million killed. In the Second we lost twenty million (so Khrushchev said; according to Stalin it was only seven million. Was Nikita being too generous? Or couldn't Iosif keep track of his capital?) All those odes! All those obelisks and eternal flames! Those novels and poems! For a quarter of a century all Soviet literature has been drunk on that blood!

In his airport bestseller from 2018, Enlightenment Now, Steven Pinker, the leading voice in the choir of bourgeois optimism, revelled in the ‘conquest of infectious disease’ all over the globe – Europe, America, but above all the developing countries – as proof that ‘a rich world is a healthier world’, or, in transparent terms, that a world under the thumb of capital is the best of all possible worlds. ‘ “Smallpox was an infectious disease” ’, Pinker read on Wikipedia – ‘yes, “smallpox was” ’; it exists no more, and the diseases not yet obliterated are being rapidly decimated. Pinker closed the book on the subject by confidently predicting that no pandemic would strike the world in the foreseeable future. Had he cared to read the science, he would have known that waves from a rising tide were already crashing against the fortress he so dearly wished to defend. He could, for instance, have opened the pages of Nature, where a team of scientists in 2008 analysed 335 outbreaks of ‘emerging infectious diseases’ since 1940 and found that their number had ‘risen significantly over time’.

To my knowledge, no society has ever existed in which ownership of capital can reasonably be described as “mildly” inegalitarian, by which I mean a distribution in which the poorest half of society would own a significant share (say, one-fifth to one-quarter) of total wealth.

If you have free trade and free circulation of capital and people but destroy the social state and all forms of progressive taxation, the temptations of defensive nationalism and identity politics will very likely grow stronger than ever in both Europe and the United States. Note, finally, that the less developed countries will be among the primary beneficiaries of a more just and transparent international tax system.

various identity struggles... have also had a shadow side in the sense that they have encouraged us to think of ourselves more as determined than as self-determining, more of victims of 'isms' (racism, sexism, capitalism, ableism) than as human beings who have the power of choice.

Taxation is not only a way of requiring all citizens to contribute to the financing of public expenditures and projects and to distribute the tax burden as fairly as possible; it is also useful for establishing classifications and promoting knowledge as well as democratic transparency.

Our democratic societies rest on a meritocratic worldview, or at any rate a meritocratic hope, by which I mean a belief in a society in which inequality is based more on merit and effort than on kinship and rents. This belief and this hope play a very crucial role in modern society, for a simple reason: in a democracy, the professed equality of rights of all citizens contrasts sharply with the very real inequality of living conditions, and in order to overcome this contradiction it is vital to make sure that social inequalities derive from rational and universal principles rather than arbitrary contingencies. Inequalities must therefore be just and useful to all, at least in the realm of discourse and as far as possible in reality as well.

the main purpose of the educational sector is not to prepare students to take up an occupation in some other sector of the economy. In all human societies, health and education have an intrinsic value: the ability to enjoy years of good health, like the ability to acquire knowledge and culture, is one of the fundamental purposes of civilization.

Those who have a lot of it never fail to defend their interests. Refusing to deal with numbers rarely serves the interests of the least well-off.

countries with similar growth rates of income per capita can end up with very different capital/income ratios simply because their demographic growth rates are not the same.

US inequality in 2010 is quantitatively as extreme as in old Europe in the first decade of the twentieth century, but the structure of that inequality is rather clearly different.

Inequality in the ownership of capital brings the rich and poor within each country into conflict with one another far more than it pits one country against another.

The main forces for convergence are the diffusion of knowledge and investment in training and skills.

if the global output and the income to which it gives rise were equally divided,each individual in the world would have an income of about 760 euros per month

In the long run, the capital/income ratio adjusts to the savings rate and structural growth rate of the economy rather than the other way around. Controversy

Over the past seventy years the various identity struggles have to some degree remediated the great wrongs that have been done to workers, people of color, Indigenous Peoples, women, gays and lesbians, and the disabled, while helping to humanize our society overall. But they have also had a shadow side in the sense that they have encouraged us to think of ourselves more as determined than as self-determining, more as victims of 'isms' (racism, sexism, capitalism, ableism) than as human beings who have the power of choice. For our own survival we must assume individual and collective responsibility for creating a new nation—one that is loved rather than feared and one that does not have to bribe and bully other nations to win support.

There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.

Other things being equal, strong demographic growth tends to play an equalizing role because it decreases the importance of inherited wealth: every generation must in some sense construct itself.

In the Soviet Union under the rule of Joseph Stalin, prosperous farmers were portrayed on propaganda posters as pigs—a dehumanization that in a rural setting clearly suggests slaughter. This was in the early 1930s, as the Soviet state tried to master the countryside and extract capital for crash industrialization. The peasants who had more land or livestock than others were the first to lose what they had.

How does a hardworking sixty-four-year-old-woman end up without a house or a permanent place to stay, relying on unpredictable low-wage work to survive? Living in a mile-high alpine wilderness, with intermittent snow and maybe mountain lions in a tiny trailer, scrubbing toilets at the mercy of employers who, on a whim, could cut her hours or even fire her? What does the future look like for someone like that?

Social democracy as we now know it underwent its moment of speciation when Eduard Bernstein began to question the orthodoxy of revolution. His essential postulate was the absence of crises. The Steven Pinker of socialism, he pointed to the empirical fact that no serious crisis had rocked the capitalist economy for the past two or three decades, which invalidated the Marxian prophecy of a system trending towards collapse. Since it was not prone to malfunctioning, the idea of seizing power, smashing decrepit capitalism and installing a completely different order had become redundant; instead social democracy could continue to grow in strength, extract piecemeal reforms and gradually lift the working class out of the mire. Rosa Luxemburg very famously objected that the crisis tendencies had merely been postponed. In the near future, they would burst forth with even more dreadful violence. Ignoring her prognosis, the social democrats in the making went ahead and presently gave their first demonstration of how they dealt with catastrophe: by expediting it through consent.

The challenge that faced the English in the seventeenth century was how to curb the absolute power of the monarch. In the twenty-first century, it is the markets that have taken on the mantle of absolutism, placing themselves above the jurisdiction of national governments. Holding the king to account was unprecedented and went against custom and tradition - holding the global markets to account is just as audacious and just as necessary.

In other words, low growth cannot adequately counterbalance the Marxist principle of infinite accumulation: the resulting equilibrium is not as apocalyptic as the one predicted by Marx but is nevertheless quite disturbing.

It is my strong belief that in the wealthiest country in the history of the world, with exploding technological progress that will greatly increase worker productivity, we can finally end austerity economics and achieve the long-sought human dream of providing a decent standard of living for all. In the twenty-first century we can end the vicious dog-eat-dog economy in which the vast majority struggle to survive, while a handful of billionaires have more wealth than they could spend in a thousand lifetimes.

The most striking fact is that the United States has become noticeably more inegalitarian than France (and Europe as a whole) from the turn of the twentieth century until now, even though the United States was more egalitarian at the beginning of this period. What makes the US case complex is that the end of the process did not simply mark a return to the situation that had existed at the beginning: US inequality in 2010 is quantitatively as extreme as in old Europe in the first decade of the twentieth century,

struggle between capitalism and communism had concealed the fact that the United Kingdom, the USSR, and the United States had much in common. Once you lifted the veil, you could see the touch points beneath—especially when you knew what you were looking for.

α = r × β where r is the rate of return on capital. For example, if β = 600% and r = 5%, then α = r × β = 30%.13 In other words, if national wealth represents the equivalent of six years of national income, and if the rate of return on capital is 5 percent per year, then capital’s share in national income is 30 percent. The formula α = r × β is a pure accounting identity. It can be applied to all societies in all periods of history, by definition. Though tautological, it should nevertheless be regarded as the first fundamental law of capitalism, because it expresses a simple, transparent relationship among the three most important concepts for analyzing the capitalist system: the capital/income ratio, the share of capital in income, and the rate of return on capital. The rate of return on capital is a central concept in

The forces which dominate us, despite their immense power, are never concrete, visible, tangible — we live under the shadow of their abstract domination. Our activity is for the most part instrumental, but the ends which we are made into instruments for never seem to appear, as if we go through our entire lives chasing after a ghost — some mirage of happiness, fulfillment, shadow of something that would, for once, be valuable in itself. Modernity feels like a permanent transition, but all it ever transitions into is another cycle of its own self-perpetuation.

Without real accounting and financial transparency and sharing of information, there can be no economic democracy. Conversely, without a real right to intervene in corporate decision-making (including seats for workers on the company’s board of directors), transparency is of little use. Information must support democratic institutions; it is not an end in itself. If democracy is someday to regain control of capitalism, it must start by recognizing that the concrete institutions in which democracy and capitalism are embodied need to be reinvented again and again.59

meritocratic extremism,” by which I mean the apparent need of modern societies, and especially US society, to designate certain individuals as “winners” and to reward them all the more generously if they seem to have been selected on the basis of their intrinsic merits rather than birth or background

the wealthiest 0.1 percent of people on the planet, some 4.5 million out of an adult population of 4.5 billion, apparently possess fortunes on the order of 10 million euros on average, or nearly 200 times average global wealth of 60,000 euros per adult, amounting in aggregate to nearly 20 percent of total global wealth. The wealthiest 1 percent—45 million people out of 4.5 billion—have about 3 million euros apiece on average (broadly speaking, this group consists of those individuals whose personal fortunes exceed 1 million euros). This is about 50 times the size of the average global fortune, or 50 percent of total global wealth in aggregate.

On the political Right, the erosion of state power by international capitalism seems natural; on the political Left, rudderless revolutions portray themselves as virtuous. In the twenty-first century, anarchical protest movements join in a friendly tussle with global oligarchy, in which neither side can be hurt since both see the real enemy as the state.

None of the Asian countries that have moved closer to the developed countries of the West in recent years has benefited from large foreign investments, whether it be Japan, South Korea, or Taiwan and more recently China. In essence, all of these countries themselves financed the necessary investments in physical capital and, even more, in human capital, which the latest research holds to be the key to long-term growth.35 Conversely, countries owned by other countries, whether in the colonial period or in Africa today, have been less successful, most notably because they have tended to specialize in areas without much prospect of future development and because they have been subject to chronic political instability.

I belong to a generation that came of age listening to news of the collapse of the Communist dicatorships and never felt the slightest affection or nostalgia for those regimes or for the Soviet Union. I was vaccinated for life against the conventional but lazy rhetoric of anticapitalism, some of which simply ignored the historic failure of Communism and much of which turned its back on the intellectual means necessary to push beyond it. I have no interest in denouncing inequality or capitalism per se—especially since social inequalities are not in themselves a problem as long as they are justified, that is, “founded only upon common utility,” as article 1 of the 1789 Declaration of the Rights of Man and the Citizen proclaims.

The most convincing proof of the failure of corporate governance and of the absence of a rational productivity justification for extremely high executive pay is that when we collect data about individual firms (which we can do for publicly owned corporations in all the rich countries), it is very difficult to explain the observed variations in terms of firm performance.

Initially in the United States, after the fall of the Berlin Wall in 1989 and then the collapse of the USSR in 1991, there was no sense that America too was in postindustrial decline. The idea that the West had won the Cold War and capitalism had prevailed over communism deflected attention from the troubles of America’s old manufacturing centers and their displaced workers.

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.

To sum up, global inequality ranges from regions in which the per capita income is on the order of 150–250 euros per month (sub-Saharan Africa, India) to regions where it is as high as 2,500–3,000 euros per month (Western Europe, North America, Japan), that is, ten to twenty times higher. The global average, which is roughly equal to the Chinese average, is around 600–800 euros per month.

Second, it is also quite clear that, all things considered, this very high level of public debt served the interests of the lenders and their descendants quite well, at least when compared with what would have happened if the British monarchy had financed its expenditures by making them pay taxes. From the standpoint of people with the means to lend to the government, it is obviously far more advantageous to lend to the state and receive interest on the loan for decades than to pay taxes without compensation. Furthermore, the fact that the government’s deficits increased the overall demand for private wealth inevitably increased the return on that wealth, thereby serving the interests of those whose prosperity depended on the return on their investment in government bonds.

According to our estimates, the optimal top tax rate in the developed countries is probably above 80 percent.50 Do not be misled by the apparent precision of this estimate: no mathematical formula or econometric estimate can tell us exactly what tax rate ought to be applied to what level of income. Only collective deliberation and democratic experimentation can do that. What is certain, however, is that our estimates pertain to extremely high levels of income, those observed in the top 1 percent or 0.5 percent of the income hierarchy. The evidence suggests that a rate on the order of 80 percent on incomes over $500,000 or $1 million a year not only would not reduce the growth of the US economy but would in fact distribute the fruits of growth more widely while imposing reasonable limits on economically useless (or even harmful) behavior.

Liberal agnosticism about the good life has some compelling historical reasons behind it. It is a mind-set that was consciously cultivated as an antidote to the religious wars of centuries ago, when people slaughtered one another over ultimate differences. After World War II, revulsion with totalitarian regimes of the right and left made us redouble our liberal commitment to neutrality. But this stance is maladaptive in the context of twenty-first-century capitalism because, if you live in the West and aren’t caught up in battles between Sunnis and Shiites, for example, and if we also put aside the risk of extraordinary lethal events like terrorist attacks in Western countries, then the everyday threats to your well-being no longer come from an ideological rival or a theological threat to the liberal secular order. They are native to that order.

In the long run, the best way to reduce inequalities with respect to labor as well as to increase the average productivity of the labor force and the overall growth of the economy is surely to invest in education. If the purchasing power of wages increased fivefold in a century, it was because the improved skills of the workforce, coupled with technological progress, increased output per head fivefold. Over the long run, education and technology are the decisive determinants of wage levels.

Futuristic as this may sound, the vision of individuals and groups as so many objects to be continuously tracked, wholly known, and shunted this way or that for some purpose of which they are unaware has a history. It was coaxed to life nearly sixty years ago under the warm equatorial sun of the Galapagos Islands, when a giant tortoise stirred from her torpor to swallow a succulent chunk of cactus into which a dedicated scientist had wedged a small machine. It was a time when scientists reckoned with the obstinacy of free-roaming animals and concluded that surveillance was the necessary price of knowledge. Locking these creatures in a zoo would only eliminate the very behavior that scientists wanted to study, but how were they to be surveilled? The solutions once concocted by scholars of elk herds, sea turtles, and geese have been refurbished by surveillance capitalists and presented as an inevitable feature of twenty-first-century life on Earth. All that has changed is that now we are the animals

Ultimately the main idea that lies behind happiness repertoires and techniques is that happier people are not only more productive and efficient workers but, most importantly, better citizens. In twenty-first-century capitalism, a powerful happiness industry has indeed emerged and expanded with the simply but alluring promise that by transforming into happier selves through the vast myriad of happiness products and services available, individuals will increase their value as social, political and economic subjects.

What we see in the period 1870–1914 is at best a stabilization of inequality at an extremely high level, and in certain respects an endless inegalitarian spiral, marked in particular by increasing concentration of wealth. It is quite difficult to say where this trajectory would have led without the major economic and political shocks initiated by the war. With the aid of historical analysis and a little perspective, we can now see those shocks as the only forces since the Industrial Revolution powerful enough to reduce inequality.

An economically weakened and isolationist America will call into question the Pax Americana, whereby the United States oversees international peace and security, and thus expose the world to the unpredictable whims and values of nondemocratic powers. These are not the solutions the world needs. Creating sustainable economic growth in the twenty-first century requires no less than aggressively retooling history’s greatest engine of growth, democratic capitalism itself. This requires a clear-eyed assessment of how ineffective the system is in its current state, politically as well as economically—and then implementing the repairs that will yield better outcomes. Too much is at stake for us to remain wedded to the status quo. The ominous rise of protectionism and nationalism throughout the world portend that the global economy and community are eroding already. The only way forward is to preserve the best of liberal democratic capitalism and to repair the worst. We cannot cling to past practices and old ideologies simply for their own sake. Doing nothing is no choice at all.

Forcing new loans upon the bankrupt on condition that they shrink their income is nothing short of cruel and unusual punishment. Greece was never bailed out. With their ‘rescue’ loan and their troika of bailiffs enthusiastically slashing incomes, the EU and IMF effectively condemned Greece to a modern version of the Dickensian debtors’ prison and then threw away the key. Debtors’ prisons were ultimately abandoned because, despite their cruelty, they neither deterred the accumulation of new bad debts nor helped creditors get their money back. For capitalism to advance in the nineteenth century, the absurd notion that all debts are sacred had to be ditched and replaced with the notion of limited liability. After all, if all debts are guaranteed, why should lenders lend responsibly? And why should some debts carry a higher interest rate than other debts, reflecting the higher risk of going bad? Bankruptcy and debt write-downs became for capitalism what hell had always been for Christian dogma – unpleasant yet essential – but curiously bankruptcy-denial was revived in the twenty-first century to deal with the Greek state’s insolvency. Why? Did the EU and the IMF not realize what they were doing? They knew exactly what they were doing. Despite their meticulous propaganda, in which they insisted that they were trying to save Greece, to grant the Greek people a second chance, to help reform Greece’s chronically crooked state and so on, the world’s most powerful institutions and governments were under no illusions. […] Banks restructure the debt of stressed corporations every day, not out of philanthropy but out of enlightened self-interest. But the problem was that, now that we had accepted the EU–IMF bailout, we were no longer dealing with banks but with politicians who had lied to their parliaments to convince them to relieve the banks of Greece’s debt and take it on themselves. A debt restructuring would require them to go back to their parliaments and confess their earlier sin, something they would never do voluntarily, fearful of the repercussions. The only alternative was to continue the pretence by giving the Greek government another wad of money with which to pretend to meet its debt repayments to the EU and the IMF: a second bailout.

Speculators, meanwhile, have seized control of the global economy and the levers of political power. They have weakened and emasculated governments to serve their lust for profit. They have turned the press into courtiers, corrupted the courts, and hollowed out public institutions, including universities. They peddle spurious ideologies—neoliberal economics and globalization—to justify their rapacious looting and greed. They create grotesque financial mechanisms, from usurious interest rates on loans to legalized accounting fraud, to plunge citizens into crippling forms of debt peonage. And they have been stealing staggering sums of public funds, such as the $65 billion of mortgage-backed securities and bonds, many of them toxic, that have been unloaded each month on the Federal Reserve in return for cash.21 They feed like parasites off of the state and the resources of the planet. Speculators at megabanks and investment firms such as Goldman Sachs are not, in a strict sense, capitalists. They do not make money from the means of production. Rather, they ignore or rewrite the law—ostensibly put in place to protect the weak from the powerful—to steal from everyone, including their own shareholders. They produce nothing. They make nothing. They only manipulate money. They are no different from the detested speculators who were hanged in the seventeenth century, when speculation was a capital offense. The obscenity of their wealth is matched by their utter lack of concern for the growing numbers of the destitute. In early 2014, the world’s 200 richest people made $13.9 billion, in one day, according to Bloomberg’s billionaires index.22 This hoarding of money by the elites, according to the ruling economic model, is supposed to make us all better off, but in fact the opposite happens when wealth is concentrated in the hands of a few individuals and corporations, as economist Thomas Piketty documents in his book Capital in the Twenty-First Century.23 The rest of us have little or no influence over how we are governed, and our wages stagnate or decline. Underemployment and unemployment become chronic. Social services, from welfare to Social Security, are slashed in the name of austerity. Government, in the hands of speculators, is a protection racket for corporations and a small group of oligarchs. And the longer we play by their rules the more impoverished and oppressed we become. Yet, like

The top centile is a particularly interesting group to study in the context of my historical investigation. Although it constitutes (by definition) a very small minority of the population, it is nevertheless far larger than the superelites of a few dozen or hundred individuals on whom attention is sometimes focused (such as the “200 families” of France, to use the designation widely applied in the interwar years to the 200 largest stockholders of the Banque de France, or the “400 richest Americans” or similar rankings established by magazines like Forbes). In a country of almost 65 million people such as France in 2013, of whom some 50 million are adults, the top centile comprises some 500,000 people.

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?

One can even imagine that inflation tends to improve the relative position of the wealthiest individuals compared to the least wealthy, in that it enhances the importance of financial managers and intermediaries. A person with 10 or 50 million euros cannot afford the money managers that Harvard has but can nevertheless pay financial advisors and stockbrokers to mitigate the effects of inflation. By contrast, a person with only 10 or 50 thousand euros to invest will not be offered the same choices by her broker (if she has one): contacts with financial advisors are briefer, and many people in this category keep most of their savings in checking accounts that pay little or nothing and/or savings accounts that pay little more than the rate of inflation.

In the United States, France, and most other countries, talk about the virtues of the national meritocratic model is seldom based on close examination of the facts. Often the purpose is to justify existing inequalities while ignoring the sometimes patent failures of the current system. In 1872, Emile Boutmy created Sciences Po with a clear mission in mind: “obliged to submit to the rule of the majority, the classes that call themselves the upper classes can preserve their political hegemony only by invoking the rights of the most capable. As traditional upper-class prerogatives crumble, the wave of democracy will encounter a second rampart, built on eminently useful talents, superiority that commands prestige, and abilities of which society cannot sanely deprive itself.

What potential did Europe develop in the early modern period that enabled it to dominate the late modern world? There are two complementary answers to this question: modern science and capitalism. Europeans were used to thinking and behaving in a scientific and capitalist way even before they enjoyed any significant technological advantages. When the technological bonanza began, Europeans could harness it far better than anybody else. So it is hardly coincidental that science and capitalism form the most important legacy that European imperialism has bequeathed the post-European world of the twenty-first century. Europe and Europeans no longer rule the world, but science and capital are growing ever stronger. The victories of capitalism are examined in the following chapter. This chapter is dedicated to the love story between European imperialism and modern science.

Thomas Piketty, an economist at the Paris School of Economics, warned in his zeitgeist-shifting book, Capital in the Twenty-First Century, that without aggressive government intervention economic inequality in the United States and elsewhere was likely to rise inexorably, to the point where the small portion of the population that currently held a growing slice of the world’s wealth would in the foreseeable future own not just a quarter, or a third, but perhaps half of the globe’s wealth, or more. He predicted that the fortunes of those with great wealth, and their inheritors, would increase at a faster rate of return than the rate at which wages would grow, creating what he called “patrimonial capitalism.” This dynamic, he predicted, would widen the growing chasm between the haves and the have-nots to levels mimicking the aristocracies of old Europe and banana republics.

First, banish the lawyers from the land. Currently the SEC, like most Washington agencies, is dominated by lawyers. In 2009 all five SEC Commissioners were lawyers. Now, I have nothing against lawyers. I’m sure they are good to their children, and many of them contribute to charities. But putting them in charge of supervising our capital markets has been an unmitigated disaster. It would be like putting a political appointee in charge of the Federal Emergency Management Agency and expecting him to handle a flood. Very few SEC lawyers understand the complex financial instruments of the twenty-first century, and almost none have ever sat on a trading desk or worked in the industry other than doing legal work. A primary reason the SEC has reached this point is that historically the SEC Commissioners have been lawyers who may know where to find the best power lunches in Washington, D.C., but don’t have a clue as to how the financial industry actually operates on a day-to-day basis.

In North America, there is no nostalgia for the postwar period, quite simply because the Trente Glorieuses never existed there: per capita output grew at roughly the same rate of 1.5–2 percent per year throughout the period 1820–2012. To be sure, growth slowed a bit between 1930 and 1950 to just over 1.5 percent, then increased again to just over 2 percent between 1950 and 1970, and then slowed to less than 1.5 percent between 1990 and 2012. In Western Europe, which suffered much more from the two world wars, the variations are considerably greater: per capita output stagnated between 1913 and 1950 (with a growth rate of just over 0.5 percent) and then leapt ahead to more than 4 percent from 1950 to 1970, before falling sharply to just slightly above US levels (a little more than 2 percent) in the period 1970–1990 and to barely 1.5 percent between 1990 and 2012. Western Europe experienced a golden age of growth between 1950 and 1970, only to see its growth rate diminish to one-half or even one-third of its peak level during the decades that followed. [...] If we looked only at continental Europe, we would find an average per capita output growth rate of 5 percent between 1950 and 1970—a level well beyond that achieved in other advanced countries over the past two centuries. These very different collective experiences of growth in the twentieth century largely explain why public opinion in different countries varies so widely in regard to commercial and financial globalization and indeed to capitalism in general. In continental Europe and especially France, people quite naturally continue to look on the first three postwar decades—a period of strong state intervention in the economy—as a period blessed with rapid growth, and many regard the liberalization of the economy that began around 1980 as the cause of a slowdown. In Great Britain and the United States, postwar history is interpreted quite differently. Between 1950 and 1980, the gap between the English-speaking countries and the countries that had lost the war closed rapidly. By the late 1970s, US magazine covers often denounced the decline of the United States and the success of German and Japanese industry. In Britain, GDP per capita fell below the level of Germany, France, Japan, and even Italy. It may even be the case that this sense of being rivaled (or even overtaken in the case of Britain) played an important part in the “conservative revolution.” Margaret Thatcher in Britain and Ronald Reagan in the United States promised to “roll back the welfare state” that had allegedly sapped the animal spirits of Anglo-Saxon entrepreneurs and thus to return to pure nineteenth-century capitalism, which would allow the United States and Britain to regain the upper hand. Even today, many people in both countries believe that the conservative revolution was remarkably successful, because their growth rates once again matched continental European and Japanese levels. In fact, neither the economic liberalization that began around 1980 nor the state interventionism that began in 1945 deserves such praise or blame. France, Germany, and Japan would very likely have caught up with Britain and the United States following their collapse of 1914–1945 regardless of what policies they had adopted (I say this with only slight exaggeration). The most one can say is that state intervention did no harm. Similarly, once these countries had attained the global technological frontier, it is hardly surprising that they ceased to grow more rapidly than Britain and the United States or that growth rates in all of these wealthy countries more or less equalized [...] Broadly speaking, the US and British policies of economic liberalization appear to have had little effect on this simple reality, since they neither increased growth nor decreased it.