Capital in the Twenty-First Century

The book stems from fifteen years of research (1998-2013) on wealth and income dynamics, expanding initial work on French high-income earners into an international project. This collaborative effort, notably with Atkinson and Saez, revealed the rapid growth of income among the top 1% in the US since the 1970s and 1980s, deepening understanding of capital measurement through historical estate records.

The book addresses whether capital accumulation leads to wealth concentration or reduced inequality. It concludes that while modern growth averted a "Marxist apocalypse," it hasn't fundamentally altered deep structures of inequality. The core thesis is that the rate of return on capital (r) consistently exceeds the rate of economic growth (g), creating unsustainable inequalities that erode democratic principles. Early economists like Ricardo and Marx are discussed, alongside Kuznets's optimistic, but flawed, theory.

This section examines the division of output between labor and capital. Conventionally considered stable, the capital-labor split proved highly unstable, plummeting post-1914–1945 shocks and recovering to 1913 levels by 2010. Capital's nature evolved from land to financial assets. The First Fundamental Law of Capitalism ($lpha = r \times \beta$) links capital's share to its rate of return and the capital/income ratio, highlighting their interdependence.

National income and capital are defined, with an emphasis on the capital/income ratio ($\beta$). Global analysis reveals sharp regional disparities, with wealthy nations benefiting from net capital income flows, while countries like Africa experience income loss due to foreign ownership. The diffusion of knowledge, skills, and education, facilitated by stable institutions, is identified as the primary mechanism for international convergence, rather than capital mobility.

Vautrin's lesson from Père Goriot illustrates how inherited wealth in nineteenth-century Europe significantly surpassed success through labor. A fundamental regularity is that capital is always more unequally distributed than labor income. The top 10% of wealth holders own over 50% of total wealth, while the bottom 50% own almost nothing, indicating the overwhelming importance of inherited wealth and its cumulative effects.

Since 1980, income inequality in the US has exploded, largely driven by the unprecedented rise of "supermanagers" and their executive pay. The top 1% captured nearly three-quarters of the top decile's additional income. This surge is attributed more to Anglo-Saxon institutional phenomena, particularly reduced top marginal tax rates, than to increased marginal productivity, highlighting the arbitrary nature of high remunerations and the failure of corporate governance.

The social state dramatically expanded its role post-WWI, with tax revenues increasing to fund health, education, and social transfers, accounting for a quarter to a third of national income. Modern redistribution operates on a logic of rights, aiming for equal access to fundamental goods. While a consensus exists against dismantling the social state, future debates focus on modernization and consolidation, not further expansion, especially in low-growth environments.

To regulate globalized capitalism and address growing inequality, a progressive global tax on capital is proposed as the ideal solution. This annual tax on net individual wealth would promote financial transparency and generate modest revenue. It is seen as superior to alternatives like inflation or prolonged austerity for debt reduction. Implementing such a tax requires international cooperation, especially automatic banking information transmission, to counter tax havens and prevent global wealth divergence.