Capital in the Twenty-First Century (103 page)

3
. If we take aging into account, the growth rate of the global adult population was
even higher: 1.9 percent in the period 1990–2012 (during which the proportion of adults
in the population rose from 57 percent to 65 percent, reaching close to 80 percent
in Europe and Japan and 75 percent in North America in 2012). See the online technical
appendix.

4
. If the fertility rate is 1.8 (surviving) children per woman, or 0.9 per adult, than
the population will automatically decrease by 10 percent every generation, or roughly
−
0.3 percent per year. Conversely, a fertility rate of 2.2 children per woman, or 1.1
per adult, yields a growth rate of 10 percent per generation (or
+
0.3 percent per year). With 1.5 children per woman, the growth rate is
−
1.0 percent per year, and with 2.5 children per women, it is
+
0.7 percent.

5
. It is impossible to do justice here to the large number of works of history, sociology,
and anthropology that have tried to analyze, by country and region, the evolution
and variations of demographic behavior (which, broadly speaking, encompasses questions
of fertility, marriage, family structure, and so on). To take just one example, consider
the work of Emmanuel Todd and Hervé Le Bras in mapping family systems in France, Europe,
and around the world, from
L’Invention de la France
(Paris: Livre de Poche, 1981; reprint, Paris: Gallimard, 2012) to
L’origine des systèmes familiaux
(Paris: Gallimard, 2011). Or, to take a totally different perspective, see the work
of Gosta Esping Andersen on the different types of welfare state and the growing importance
of policies designed to make work life and family life compatible: for example,
The Three Worlds of Welfare Capitalism
(Princeton: Princeton University Press, 1990).

6
. See the online technical appendix for detailed series by country.

7
. The global population growth rate from 2070 to 2100 will be 0.1 percent according
to the central scenario,
−
1.0 percent according to the low scenario, and
+
1.2 percent according to the high scenario. See the online technical appendix.

8
. See Pierre Rosanvallon,
The Society of Equals,
trans. Arthur Goldhammer (Cambridge, MA: Harvard University Press, 2013), 93.

9
. In 2012, the average per capita GDP in Sub-Saharan Africa was about 2,000 euros,
implying an average monthly income of 150 euros per person (cf. Chapter 1,
Table 1.1
). But the poorest countries (such as Congo-Kinshasa, Niger, Chad, and Ethiopia) stand
at one-third to one-half that level, while the richest (such as South Africa) are
two to three times better off (and close to North African levels). See the online
technical appendix.

10
. Maddison’s estimates (which are fragile for this period) suggest that in 1700, North
America and Japan were closer to the global average than to Western Europe, so that
overall growth in average income in the period 1700–2012 would be closer to thirty
times than to twenty.

11
. Over the long run, the average number of hours worked per capita has been cut by
approximately one-half (with significant variation between countries), so that productivity
growth has been roughly twice that of per capita output growth.

12
. See Supplemental Table S2.2, available online.

13
. Interested readers will find in the online technical appendix historical series
of average income for many countries since the turn of the eighteenth century, expressed
in today’s currency. For detailed examples of the price of foodstuffs, manufactured
goods, and services in nineteenth- and twentieth-century France (taken from various
historical sources including official indices and compilations of prices published
by Jean Fourastié), along with analysis of the corresponding increases in purchasing
power, see Thomas Piketty,
Les Hauts revenus en France au 20e siècle
(Paris: Grasset, 2001), 80–92.

14
. Of course, everything depended on where carrots were purchased. I am speaking here
of the average price.

15
. See Piketty,
Les Hauts revenus en France,
83–85.

16
. Ibid., 86–87.

17
. For a historical analysis of the constitution of these various strata of services
from the late nineteenth century to the late twentieth, starting with the examples
of France and the United States, see Thomas Piketty, “Les Créations d’emploi en France
et aux Etats-Unis: Services de proximité contre petits boulots?”
Les Notes de la Fondation Saint-Simon
93, 1997. See also “L’Emploi dans les services en France et aux Etats-Unis: Une analyse
structurelle sur longue période,”
Economie et statistique
318, no. 1 (1998): 73–99. Note that in government statistics the pharmaceutical industry
is counted in industry and not in health services, just as the automobile and aircraft
industries are counted in industry and not transport services, etc. It would probably
be more perspicuous to group activities in terms of their ultimate purpose (health,
transport, housing, etc.) and give up on the distinction agriculture/industry/services.

18
. Only the depreciation of capital (replacement of used buildings and equipment) is
taken into account in calculating costs of production. But the remuneration of public
capital, net of depreciation, is conventionally set at zero.

19
. In
Chapter 6
I take another look at the magnitude of the bias thus introduced into international
comparisons.

20
. Hervé Le Bras and Emmanuel Todd say much the same thing when they speak of the “Trente
glorieuses culturelles” in describing the period 1980–2010 in France. This was a time
of rapid educational expansion, in contrast to the “Trente glorieuses économiques”
of 1950–1980. See
Le mystère français
(Paris: Editions du Seuil, 2013).

21
. To be sure, growth was close to zero in the period 2007–2012 because of the 2008–2009
recession. See Supplemental Table S2.2, available online, for detailed figures for
Western Europe and North America (not very different from the figures indicated here
for Europe and North America as a whole) and for each country separately.

22
. See Robert J. Gordon,
Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,
NBER Working Paper 18315 (August 2012).

23
. I return to this question later. See esp.
Part Four
,
Chapter 11
.

24
. Note that global per capita output, estimated to have grown at a rate of 2.1 percent
between 1990 and 2012, drops to 1.5 percent if we look at output growth per adult
rather than per capita. This is a logical consequence of the fact that demographic
growth rose from 1.3 to 1.9 percent per year during this period, which allows us to
calculate both the total population and the adult population. This shows the importance
of the demographic issue when it comes to breaking down global output growth (3.4
percent per year). See the online technical appendix.

25
. Only Sub-Saharan Africa and India continue to lag. See the online technical appendix.

26
. See Chapter 1,
Figures 1.1
–
2
.

27
. The law of 25 germinal, Year IV (April 14, 1796), confirmed the silver parity of
the franc, and the law of 17 germinal, Year XI (April 7, 1803), set a double parity:
the franc was equal to 4.5 grams of fine silver and 0.29 grams of gold (for a gold:silver
ratio of 1/15.5). It was the law of 1803, promulgated a few years after the creation
of the Banque de France in 1800, that give rise to the appellation “franc germinal.”
See the online technical appendix.

28
. Under the gold standard observed from 1816 to 1914, a pound sterling was worth 7.3
grams of fine gold, or exactly 25.2 times the gold parity of the franc. Gold-silver
bimetallism introduced several complications, about which I will say nothing here.

29
. Until 1971, the pound sterling was divided into 20 shillings, each of which was
further divided into 12 pence (so that there were 240 pence in a pound). A guinea
was worth 21 shillings, or 1.05 pounds. It was often used to quote prices for professional
services and in fashionable stores. In France, the livre tournois was also divided
into 20 deniers and 240 sous until the decimal reform of 1795. After that, the franc
was divided into 100 centimes, sometimes called “sous” in the nineteenth century.
In the eighteenth century, a louis d’or was a coin worth 20 livres tournois, or approximately
1 pound sterling. An écu was worth 3 livres tournois until 1795, after which it referred
to a silver coin worth 5 francs from 1795 to 1878. To judge by the way novelists shifted
from one unit to another, it would seem that contemporaries were perfectly aware of
these subtleties.

30
. The estimates referred to here concern national income per adult, which I believe
is more significant than national income per capita. See the online technical appendix.

31
. Average annual income in France ranged from 700 to 800 francs in the 1850s and from
1300 to 1400 francs in 1900–1910. See the online technical appendix.

1
. According to available estimates (especially King’s and Petty’s for Britain and
Vauban’s and Boisguillebert’s for France), farm buildings and livestock accounted
for nearly half of what I am classifying as “other domestic capital” in the eighteenth
century. If we subtracted these items in order to concentrate on industry and services,
then the increase in other domestic capital not associated with agriculture would
be as large as the increase in housing capital, indeed slightly higher.

2
. César Birotteau’s real estate speculation in the Madeleine quarter is a good example.

3
. Think of Père Goriot’s pasta factories or César Birotteau’s perfume operation.

4
. For further details, see the online technical appendix.

5
. See the online technical appendix.

6
. Detailed annual series of trade and payment balances for Britain and France are
available in the online technical appendix.

7
. Since 1950, the net foreign holdings of both countries have nearly always ranged
between
−
10 and
+
10 percent of national income, which is one-tenth to one-twentieth of the level attained
around the turn of the twentieth century. The difficulty of measuring net foreign
holdings today does not undermine this finding.

8
. More precisely, for an average income of 30,000 euros in 1700, average wealth would
have been on the order of 210,000 euros (seven years of income rather than six), 150,000
of which would have been in land (roughly five years of income if one includes farm
buildings and livestock), 30,000 in housing, and 30,000 in other domestic assets.

9
. Again, for an average income of 30,000 euros, average wealth in 1910 would have
been closer to 210,000 euros (seven years of national income), with other domestic
assets closer to 90,000 (three years income) than 60,000 (two years). All the figures
given here are deliberately simplified and rounded off. See the online technical appendix
for further details.

10
. More precisely, Britain’s public assets amount to 93 percent of national income,
and its public debts amount to 92 percent, for a net public wealth of
+
1 percent of national income. In France, public assets amount to 145 percent of national
income and debts to 114 percent, for a net public wealth of
+
31 percent. See the online technical appendix for detailed annual series for both
countries.

11
. See François Crouzet,
La Grande inflation: La monnaie en France de Louis XVI à Napoléon
(Paris: Fayard, 1993).

12
. In the period 1815–1914, Britain’s primary budget surplus varied between 2 and 3
percent of GDP, and this went to pay interest on government debt of roughly the same
amount. The total budget for education in this period was less than 2 percent of GDP.
For detailed annual series of primary and secondary public deficits, see the online
technical appendix.

13
. These two series of transfers explain most of the increase in French public debt
in the nineteenth century. On the amounts and sources, see the online technical appendix.

14
. Between 1880 and 1914, France paid more interest on its debt than Britain did. For
detailed annual series of government deficits in both countries and on the evolution
of the rate of return on public debt, see the online technical appendix.

15
. Ricardo’s discussion of this issue in
Principles of Political Economy and Taxation
(London: George Bell and Sons, 1817) is not without ambiguity, however. On this point,
see Gregory Clark’s interesting historical analysis, “Debt, Deficits, and Crowding
Out: England, 1716–1840,”
European Review of Economic History
5, no. 3 (December 2001): 403–36.

16
. See Robert Barro, “Are Government Bonds Net Wealth?”
Journal of Political Economy
82, no. 6 (1974): 1095–1117, and “Government Spending, Interest Rates, Prices, and
Budget Deficits in the United Kingdom, 1701–1918,”
Journal of Monetary Economics
20, no. 2 (1987): 221–48.

17
. Paul Samuelson,
Economics,
8th ed. (New York: McGraw-Hill, 1970), 831.

18
. See Claire Andrieu, L. Le Van, and Antoine Prost,
Les Nationalisations de la Libération: De l’utopie au compromis
(Paris: FNSP, 1987), and Thomas Piketty,
Les hauts revenus en France au 20e siècle
(Paris: Grasset, 2001), 137–138.